Best HSBC Hybrid Mutual Funds

L&T Investment Management Limited is the asset management wing of L&T Financial Services. It is presently one of the top AMCs in India. Since its founding year in 1997, the company has managed assets worth Rs.75819.18 crore as of 31st May 2021. L&T has approximately 42 investor centres across India with more than 2546880 live folios.

Furthermore, the AMC offers more than 30 mutual fund schemes, including equity funds, fixed-income funds, close-ended funds and the best L&T hybrid mutual funds. 

A fund that invests in different types of assets or asset classes is a hybrid fund. It leads to a diversified portfolio. These funds generally invest in a mixture of stocks and bonds. Therefore, they are also known as asset allocation funds. As the name suggests, these funds are a combination of equity and debt funds. So, hybrid MFs create a balanced portfolio so that an investor gets regular income along with capital appreciation in the long term. 

There are different types of hybrid MFs one can invest in, namely, equity-oriented, debt-oriented, balanced funds, monthly income funds, and arbitrage funds. The best L&T hybrid mutual funds have multiple assets in their portfolio that makes them effectively diversified. Also, these funds generate higher returns than pure debt funds due to their investment in several stocks. 

Moreover, the best L&T hybrid mutual funds 2023 are a lower risk investment compared to potentially high-risk equity funds. These invest in shares of various companies and fixed-income and money market instruments to generate risk-adjusted returns. 

L&T Investment Management Limited includes around 5 hybrid fund schemes, including the top L&T hybrid mutual fund. Each type of scheme has its advantages and disadvantages. However, a clear understanding of taxability is vital before planning to invest in any one of the schemes. 

When it comes to the best L&T hybrid mutual funds, the taxation on the capital gains depends on the equity exposure. When the exposure is more than 65%, the fund will be taxed as an equity fund. Alternatively, when the allocation is less than 65%, the debt fund taxation rule will be applicable to the scheme. 

Taxability

Long-term Capital Gains Tax: Investors realise long-term capital gains on an equity-based fund if they sell their units after a year. LTCG above Rs.1 lakh attracts 10% tax in this case. In the case of debt-oriented funds, investors realise LTCG on selling their units after three years from the date of purchase. Such gains attract 20% tax + indexation benefits. 

Short-term Capital Gains Tax: Equity-oriented fund units sold before a year of investment provide short-term capital gains, taxed at 15%. One can realise STCG on a debt-based fund by selling units before 36 months. Investors need to add total gains in a year to their taxable income.

Factors to Consider Before Investing

In addition to this, there are other points to follow before investing in the best L&T hybrid mutual fund.

Investment objective: You need to have a clear idea about the objective of your investment prior to investing. This will help you evaluate whether a scheme aligns with your motive of investment. It’s also helpful in selecting the period for which you need to stay invested in a scheme to realise your financial aspirations. 

Holding analysis: The risks associated with hybrid mutual funds depends on their asset allocation. Therefore, a prior evaluation of their portfolio will help in estimating the risks one has to bear. It will help if you check the types of stocks and bonds held by a hybrid mutual fund scheme before investing in the same. For instance, you can check the credit rating of different bond issuers to assess the types of associated risks.

Risk assessment: Due to the equity component of the best L and T hybrid mutual funds, there are some risks associated while investing in these funds. But, you can decrease your risk by way of regular portfolio balancing. Nonetheless, these MFs are less risky than pure equity funds. 

Fund performance: The performance of a fund to date is crucial as it determines how it fared under various market conditions. Although this is not an indicator of probable returns a fund will generate, it is indicative of the trends that are necessary to consider before investing. 

Expense ratio: Fund houses charge a certain fee for managing, administering, and distributing MFs. This fee is deducted from the final returns and expressed as a percentage. 

Experience of a fund manager: Fund managers create a portfolio according to your investment objective and allocate the funds in debt and equity instruments in appropriate proportion. This task requires experience because, with the correct allocation, one can receive higher returns while minimising risks. Therefore, review the fund manager’s expertise before opting for a scheme. This evaluation is particularly important if you are opting for the best L and T hybrid mutual funds belonging to the balanced advantage kind.

Exit load: Upon exiting a scheme within its lock-in period, some schemes levy a charge. However, this varies across hybrid MF schemes as some of them do not charge anything for redeeming funds partially or fully within a stipulated duration. Therefore, it is imperative to make an informed decision by considering this factor. 

The selection of the best LT hybrid mutual funds might seem difficult, especially for a novice. However, following the aforementioned points and understanding the basics of mutual funds can be a good start.