Best PGIM Hybrid Mutual Funds

PGIM India mutual fund was set up in 2010 as a part of Prudential Financial Inc.'s global investment management wing, PGIM. The company brought years of investment experience from the USA, Europe, Asia, Latin America and other international markets. It has helped them to gain prominence in the Indian market and position themselves as a leading AMC. The company has an asset management portfolio of approximately Rs. 6522 crores as of 31st March 2021. The company has more than 20 open-ended mutual funds, including the best PGIM hybrid mutual funds.

Hybrid funds or balanced funds have a unique working principle. As their name suggests, they struck a balance between equity and debt funds. Here the fund manager evaluates both equity and money market potentials and invests in them accordingly. 

The best PGIM hybrid mutual fund aims to deliver the best possible returns by generating income via equity investments along with stable wealth appreciation through debt investments. The target here is to curate a stable portfolio. Fund managers remain in charge of the asset allocation for hybrid funds, keeping investors' objectives in mind.

Hybrid mutual funds are classified depending on their asset allocation. For example, if a fund has more than 65% of assets invested in the equity market, it will be treated as an equity hybrid mutual fund. Based on this concept, the fund is further divided into sub-types, such as conservative, aggressive, balanced, dynamic, arbitrage, multi-asset, and equity savings hybrid funds.

Here, conservative funds mainly focus on debt market instruments, whereas aggressive funds have a contrasting approach. Balanced funds bring in equilibrium, and dynamic funds shift their investments as per the market conditions. The focus of multi-asset funds is to invest in at least 3 or more funds to generate the highest possible returns. In arbitrage funds, fund managers mainly focus on equity market instruments.

The major advantage of hybrid funds is their ability to deliver high returns without being exposed to high risk. Since they invest in multiple assets and are actively managed, they can produce expected returns. Here, equity components generate income, and debt components provide safety net market fluctuations.

The best PGIM hybrid mutual funds include more than 4 schemes that come with handsome return prospects.

Taxability

Besides the classification of hybrid funds, one should also learn about their taxability to make an informed decision. A point to note here is that, since the best PGIM hybrid mutual funds constitute both equity and debt funds, the tax treatment depends on the asset allocation of respective funds. Therefore, hybrid funds where the debt component is higher (more than 65%) will be taxed as per the taxation rules of debt funds. On the other hand, funds where the equity component is higher than 65%, will be taxed like an equity fund.

Long-term Capital Gains Tax:  Long-term Capital Gains exceeding Rs. 1 lakh earned on equity-oriented hybrid fund attracts LTCGT at 10% + cess + surcharge. On the other hand, LTCG earned on debt-oriented hybrid funds attracts a tax rate of 20% with indexation benefits. 

Short-term Capital Gains Tax: Short-term Capital Gains on equity-oriented funds attract STCGT at 15% + cess + surcharge. Conversely, for debt-oriented hybrid funds, the capital gains on units held for less than 36 months are taxed as per the investor's income tax slab. 

TDS: A TDS is levied on equity-oriented hybrid funds if the dividend income exceeds Rs. 5000 in a fiscal year. 

Factors to Consider Before Investing

Alongside the taxability of hybrid mutual funds, keep in mind these points to consider before investing for informed decisions.

Investment objective: The first thing to consider while planning a mutual fund investment is its objectives. Financial goals and their timeline are two vital things to be aware of in this process. It will help individuals find the best PGIM hybrid mutual funds 2023 that matches their investment objectives.

Risk appetite: Mutual fund investments are risky, and investors should assess their risk-taking capacity before investing. Even though hybrid funds are more balanced, they are exposed to the market's volatility through equity funds. Hence, one should consider every possibility to find an appropriate scheme from the top PGIM hybrid mutual funds that suits their risk-taking capability. 

Past performance of the fund: Considering the performance record of a fund is also vital. It provides an idea about its performance during different market phases. However, a point to remember here is that previous performance does not guarantee future prospects; it offers an overview to make a better decision.

Holding analysis: It is vital to complete a holding analysis before investing. It offers an outline of investment areas and expected returns.

Experience of the fund manager: Whether one is investing with PGIM India Mutual Funds or any other AMC, it is crucial to check the experience of a fund manager. It will help to understand if they are experienced enough to navigate through different market conditions or not.

Expense ratio: Fund management incurs a cost, and AMCs deduct that from the final returns which is called the expense ratio. 

Exit load: Asset Management Companies charge an exit load if an investor pulls out of the scheme before a designated period. Generally, the specifics of this fee vary from one scheme to another, while some may not levy an exit load at all. 

Choosing the best PGIM hybrid mutual funds can be tough, especially for inexperienced investors. Nonetheless, they can keep in mind the pointers mentioned above, and with a basic understanding of mutual funds, they can start.