Best HSBC Hybrid Mutual Funds

The HSBC Mutual Fund was established in 2002, offering investors with an assortment of investment and asset protection products across equities, fixed income, liquid, and multi-asset categories. In its more than 18 years of operation, the fund house has gained a large client base with over Rs. 10000 crores in Assets under Management (AuM). 

HSBC Mutual Fund offers more than 30 mutual fund products, including the best HSBC hybrid mutual funds, to meet preferences like wealth creation, growth, and liquidity. 

Hybrid funds invest in more than one asset class, including equities and debt, thus investors a more uniform balance between risk and return. With these funds, individuals can invest in multiple assets like equities, debt, and sometimes even gold and real estate. Investors can, therefore, diversify their investment across various asset classes.

HSBC mutual fund offers more than 7 hybrid mutual funds with varying asset allocation and maturity periods. 

Hybrid mutual funds allow capital appreciation in the long run without assuming high risks. The top HSBC hybrid mutual funds have balanced portfolios with assets distributed in various classes. This distribution helps mitigate risk, generates income in the short run, and gives a balanced performance in changing market conditions. Moreover, these mutual funds serve as much more viable investment options for individuals with varying financial goals and risk tolerances. 

Hybrid funds are classified into several types based on asset allocation. The best HSBC hybrid mutual funds can be conservative funds, balanced funds, aggressive funds, dynamic asset allocation, multi-asset allocation, equity savings, and arbitrage funds. 

Conservative schemes provide a good option over traditional savings with 10-25% assets allocated in debt instruments and the other in equities. Aggressive funds take the opposite approach with 65-80% investment in equity classes and the rest in debt assets. Multi-asset allocations invest in more than three asset classes, while balanced funds invest 40% and 60% in equities or debt. 

Other hybrid mutual funds include dynamic assets, which allow shifting between 100% debt and equities, and equity savings which also invest in derivatives. Arbitrage funds involve using the arbitrate strategy to generate profits from price differences and market imbalances. 

Factors to Consider Before Investing

Before choosing the best HSBC hybrid mutual funds, investors should consider the following factors. 

The risk factor: While hybrid funds are not entirely risk-free, investors can assume lower risk while investing in them, as compared to equity funds. If the hybrid fund is equity-oriented, it automatically presents a higher risk to investors. Debt-oriented funds are also not completely devoid of risks, even though this usually affects only the interest rates. 

Returns: Even the best HSBC hybrid mutual funds might not offer guaranteed returns. Market performance strongly influences the returns, with funds comprising a higher equity component tend to perform better. Thus, an aggressive fund's returns will depend more on equity markets compared to balanced and conservative funds. On the other hand, the debt component will show stabler returns during a bear phase. 

Investment horizon: Hybrid funds have better chances of earning higher and more stable returns with a longer maturity period. Most hybrid funds stand to generate high profits in a medium to a long-term investment horizon of around three to five years. 

Costs: AMCs charge a fee as a specific percentage of investment returns known as the expense ratio to manage a portfolio. The highest amount that can be charged under this is usually 2.25%. Choosing a fund with a lower expense ratio can increase the NAV (Net Asset Value) over time, generating more returns. Some companies also charge an exit fee when withdrawing prematurely.

Financial goals: Investors should be clear on their financial goals before choosing the best HSBC hybrid mutual fund. They might want to plan ahead to achieve their goals by striking the right balance between risk and returns. This includes avoiding unnecessary risks that could end up piling more losses or being so risk-averse that they are unable to achieve their financial goals. Choosing the right hybrid plan will benefit investors greatly, as each type performs well with the right maturity period. For example, an aggressive fund performs well in the long term, and a conservative fund lowers the chances of a loss with its short-term maturity. 

Taxability

Investors also need to be aware of taxation policies before choosing to invest in any mutual fund schemes.

Long-Term Capital Gains Tax (LTCG): When equity allocation in a specific fund is more than 65%, it gets treated as equity funds. LTCG on equity funds generating capital gains of up to Rs. 1 lakh every year is exempt from taxes. Above this, the LTCG is taxed at a rate of 10%. LTGC for debt-type hybrid funds is 20%. 

Short-Term Capital Gains Tax (STCG): STCG on equity-oriented hybrid funds that are sold-off before 1 year is applied at the rate of 15%. For debt-oriented funds, the earnings obtained if they are sold off before 3 years are added to the investor's taxable income and charged as per his/her respective tax slabs. 

TDS: This is not charged for any hybrid mutual funds. 

These were some of the essential points investors need to understand before investing in the best HSBC hybrid mutual funds 2022.