Best Kotak Hybrid Mutual Funds

Kotak Mutual Fund is one of the largest AMCs in India in terms of asset size. As per its quarterly figure in FY 2019-20, this fund house managed assets worth Rs.1.68 lakh crore. This AMC is a wholly-owned subsidiary of Kotak Mahindra Bank Limited, with Kotak Mahindra Asset Management Company managing its assets.

This fund house offers 35+ direct schemes and 40+ regular plans in various categories. These schemes include debt funds, equity schemes, ETFs, and some of the best Kotak hybrid mutual funds.

A hybrid fund is a kind of mutual fund scheme. It invests in varying types of securities. Investors can choose from a number of hybrid fund categories based on the mix of debt and equity investments. There are seven categories of hybrid mutual funds, namely: balanced, aggressive, multi-asset allocation, conservative, equity savings funds, dynamic asset location, and arbitrage funds.

Essentially, these funds operate on three principles: allocation, correlation, and diversification.

Hybrid MFs allocate the fund corpus by investing in different classes of assets – equity and debt, primarily. Then, they enable correlation by way of the co-movement of returns. Moreover, given that the best Kotak hybrid mutual funds have multiple types of assets in their portfolio, they achieve effective diversification.

These mutual funds invest in equity as well as debt instruments in various proportions. SEBI mandates a 40% - 60% between equity and debt securities. 

As the best Kotak hybrid mutual funds 2023 invest in a blend of instruments, they usually offer higher returns as compared to regular debt fund schemes. On the other hand, given that hybrid MFs lower associated risk, investing in such schemes tends to be safer as compared to other aggressive investment tools, such as equity funds.

Kotak Mutual Fund offers roughly 5 schemes under its category of hybrid schemes. These comprise equity-oriented funds, arbitrage funds, balanced advantaged funds, and debt-based schemes, among others.  

Taxability

Prior to investing in any of the top Kotak hybrid mutual funds, prospective investors must have a clear understanding of their taxability. In the case of hybrid MFs, gains are taxable as per a scheme’s debt-equity component.

Short-term capital gains tax: Hybrid funds with a larger share of investment in equity shares attract a 15% STCG tax if capital gains are realised within the first year. If an investor realises capital gain from the sale of debt-based fund units before 3 years of investment, it is added to their income and taxed accordingly. 

Long-term capital gains tax: A 10% LTCGT is applicable if an investor sells their equity-based MF scheme units after 1 year of investment. Debt-oriented funds attract 20% LTCGT + indexation benefits on proceeds from the sale of units after 3 years. 

TDS: TDS is not applicable on hybrid fund schemes with a significant investment in debt securities. On the other hand, dividends paid out for an equity-based scheme attract 10% TDS. 

Factors to Consider Before Investing

Investors should ascertain their investment objective and risk appetite when choosing a hybrid mutual fund. Furthermore, a comprehensive understanding of various factors is essential to determine the best Kotak hybrid mutual fund. 

Return: These MFs are vulnerable to market movements, which leads to varying returns. Moreover, the performance of a hybrid fund’s underlying securities is also reflected in its total returns. 

Risk factor: Hybrid funds, like any investment in equity markets, carries some degree of risk. However, these funds tend to be less risky than pure equity mutual funds. Investors can lower their concentrated risk of investment through regular portfolio balancing.

Holding analysis: These MFs carry an investment risk premised upon their asset allocation. Therefore, an evaluation of their portfolio beforehand can offer an elementary idea of the risks involved.

Past performance of the fund: Investors can analyse a fund’s performance over the years and in varied market conditions. However, prospective investors must know that past performance is not an indicator of probable returns. This analysis can help study its bullish or bearish trends over varied market conditions, which assists in choosing the best Kotak hybrid mutual funds.

Expense ratio: As asset management companies manage an investment portfolio, they levy an annual charge against this service. This fee is expressed in percentage and is known as an expense ratio. For example, a hybrid mutual fund offering a 7% return with an expense ratio of 2.11% offers 4.89% of actual returns to its investors. 

Experience of the fund manager: When investing in the best Kotak hybrid mutual funds, it is essential to evaluate their respective fund managers’ experience. This analysis offers valuable insights into a fund manager’s ability to manoeuvre the MF through market ups and downs. 

Exit Load: Mutual fund houses charge a fee when investors exit a scheme fully or partially within a specific period. This fee is known as exit load. It varies with every MF plan, wherein some schemes may not feature any exit load. 

Therefore, evaluation of these aspects is critical when investing in the best Kotak hybrid mutual funds.