Best Motilal Oswal Hybrid Mutual Funds

The Motilal Oswal Asset Management Company Ltd. was established in 2009 as a portfolio management organization, offering a range of mutual fund schemes. They are promoted and sponsored by Motilal Oswal Financial Services Ltd. (MOFSL). It has active operations in over 600 locations in India with more than 9 lakh customers and assets under management worth Rs.25,000 crore. They also undertake other business activities, including management and advisory services to offshore funds and financial consultancy. 

Motilal Oswal Mutual Fund offers more than 10 different schemes, including equity, debt, commodity, and the best Motilal Oswal hybrid mutual funds. 

Hybrid funds invest in a mix of asset classes, including debt and equities, and even gold. These form a balance between high-risk equity and low-risk debt investments and try to meet the financial goals of both. The fund managers form a balanced portfolio according to the fund category and allocate funds accordingly. 

Hybrid funds invest in multiple asset classes and subclasses to achieve diversification and avoid concentration risk. Thus, losses in one asset class are offset by profits gained by another. The best Motilal Oswal hybrid mutual funds offer higher returns compared to debt funds while not being as risky as equity funds. There are different types of hybrid funds involving different levels of risk tolerance and catering to investment objectives. Thus, with hybrid funds, investors can get regular interest income as well as wealth appreciation in the long run. 

However, largely, hybrid funds can be categorised into equity and debt-oriented funds. In general, the best Motilal Oswal hybrid mutual funds invest in debt and equities in a 60:40 ratio. However, this allocation % can vary depending on the scheme type.

Equity-oriented aggressive funds invest in stocks and related instruments majorly to provide high returns at modest to high risk levels. However, risk debt-oriented conservative funds are more suited for a risk-averse approach as they invest a majority of the assets in debt instruments. 

Arbitrage funds offer stable returns as they buy stocks at lower prices in one exchange and sell them at a higher price in a different exchange. Other types of hybrid funds include multi-asset allocation funds, which invest in at least three asset classes. 

Dynamic asset allocation can shift assets between 100% debt and 100% equities based on market conditions. Another type of hybrid fund is the equity savings that invest in derivatives to generate a stable return. 

Motilal Oswal offers approximately 2 hybrid mutual fund schemes. 

Taxability

Another factor to consider before choosing the best Motilal Oswal hybrid mutual funds is its taxability. 

Long-term Capital Gains Tax: The equity component of hybrid funds is treated as equity funds. Thus, the LTCG tax on this is 10% over Rs.1 lakh, while for debt-oriented funds, it’s charged at 20% with indexation. 

Short-term Capital Gains Tax: The STCG for equity-based funds is taxed at 15%. For debt-oriented schemes, STCG is added to an investor’s income and taxed accordingly. 

TDS: TDS @ 10% is applicable on dividends exceeding Rs.5000.

Factors to Consider Before Investing

But, there are several factors investors need to consider before they choose the best Motilal Oswal hybrid mutual funds 2021. 

Expected returns: Hybrid funds balance modest returns with lower risks to provide a balanced mix of returns and stability. The equity component of a hybrid fund decides the potential to earn higher returns while investment in debt ensures stability. The probability of higher returns can vary depending on the best Motilal Oswal hybrid mutual fund’s asset allocation. An equity-oriented scheme is poised to offer better returns than a debt-based fund. But, the returns may be more stable if it’s a debt-based scheme.

Risks involved: The debt component of a hybrid fund provides a cushion against market fluctuations. Thus, the portion of debt in a hybrid fund decides its stability and volatility. At the same time, the type of equities owned by a fund influences the risk factor. Funds with a majority investment in large-cap stocks will usually be less risky than ones with investment in small-cap stocks.

Expenses: Hybrid funds charge a fee for managing the funds, known as the expense ratio. These are generally not higher than 2.25%, but a lower amount is better for higher take-home returns. If the equity component is very high, AMCs might charge a higher expense ratio for actively managed funds.  

Investment goals: Investors need to carefully consider their investment goals before selecting the top Motilal Oswal hybrid mutual funds. One variant of hybrid funds might suit conservative investors who want to increase their income without taking a substantial risk. Another kind of hybrid MF may be more suitable for a risky investment outlook. Hence, it’s essential to determine which end of the investment spectrum suits you to make a fruitful choice. 

Investment horizon: Hybrid funds are ideal for a medium-term investment horizon of three to five years. As a portion of the funds is invested debt assets, such a maturity period allows the fund to grow without significant volatility. 

These are some of the essential parameters that investors looking for the best Motilal Oswal hybrid mutual funds need to check.