Best Quantum Hybrid Mutual Funds

India’s first direct-to investor mutual fund, Quantum Mutual Funds, is a subdivision of its parent company, Quantum Advisors. It was formally established with SEBI registration in 2005. The fund house managing its schemes is called Quantum Asset Management Company. As of March 2021, the AMC maintained an average quarterly AUM of Rs.1785.69 crore. 

Currently, the fund house offers around 10 schemes catering to different categories. One of them includes the best Quantum hybrid mutual funds.

As the name suggests, hybrid mutual funds allocate wealth to assets of more than 1 fund category. The most common combination under this fund category is equity and debt. 

Depending on the proportion of investment among these categories, hybrid MFs have 2 broad classifications – equity-oriented and debt-oriented funds. In addition, individuals can also come across 7 different classifications of hybrid MF schemes depending on investment style, tenure, and other factors. These are multi-asset allocation, dynamic asset allocation, arbitrage, equity savings, aggressive, conservative, and balanced hybrid funds.

Generally, a fund investing 65% or more of its resources in stocks of different companies is called equity-oriented. Conversely, funds investing less than 65% in equity units and the rest in money market instruments are debt-oriented. 

Taxability

This classification based on equity exposure also decides the taxability of the top Quantum hybrid mutual funds. Here is a brief overview of how these different types of taxes apply to a hybrid MF.

Short-term Capital Gains (STCG) Tax: Investors might often need to cash in on their fund units well before a specific period. If this instance takes place with equity-oriented fund units within 1 year of their purchase, taxes will apply to these returns at a rate of 15%, regardless of the amount. Conversely, if individuals decide to sell debt-oriented fund units within 3 years of purchase, the returns will become a part of their total income for the FY. Thereafter, this amount will be taxable according to the individual’s respective income tax slab.

Long-term Capital Gains (LTCG) Tax: When individuals sell units of the best Quantum hybrid mutual funds after 1 year for equity-oriented ones, they receive long-term capital gains. Investors need to pay 10% tax on the part of this amount exceeding Rs.1 lakh. If individuals receive returns by selling debt-oriented fund units after 3 years of purchase, the LTCG will be taxable at 20% and 10%, with and without indexation, respectively.

TDS: If individuals receive dividends over Rs.5000, these will attract a 10% TDS. 

The total cost involving all taxes can reduce your net returns from a hybrid MF. Therefore, keeping the above details in mind is important before liquidating investments in the best Quantum hybrid mutual fund.

Factors to Consider Before Investing

Besides this, there are other factors to consider when choosing from the best Quantum hybrid mutual funds. These are:

Return: The performance of a hybrid MF’s underlying assets affects its Net Asset Value (NAV). These returns are dependent on market movements and can vary accordingly. While equity-oriented funds have the scope of higher gains, debt-oriented funds offer steadier returns.

Risk factors: The best Quantum hybrid mutual funds in 2023 come with lesser risk than pure equity funds. However, these funds aren’t free of risk. The equity component of these funds is subject to market volatility. On the other hand, the debt component is subject to inflationary, credit, and interest rate risks. Adequate portfolio balancing can help reduce the concentrated investment risk.  

Investment objective: The foremost thing an investor should do before choosing from the best Quantum hybrid mutual funds is examining their financial goal. Individuals may decide beforehand if they are looking for aggressive return generation or steady income flow. Thereafter, they can pick a fund scheme aligning with these goals perfectly.

Past performance of funds: Individuals can conduct detailed research of fund schemes before investing in one. A fund’s past performance can give individuals an idea about its investment style and performance during changing market conditions. However, note that a fund’s track record is not a definite indicator of its future performance.

Expense ratio: This is the annual fee that fund houses charge against the maintenance of a portfolio. This cost can differ across AMCs and significantly impact an investor’s net returns. Therefore, individuals must check for this cost and compare it with the median before investing in the most suitable fund scheme.

Exit load: Another expense that can significantly impact an investor’s final returns is the exit load. This is a fee AMCs charge when investors redeem units before the completion of a particular period. While this charge is prevalent in some schemes, others don’t have any. As a result, individuals need to look out for such expenses before allocating their wealth into investment assets.

Besides, there are a variety of factors like investment horizon, holding analysis, etc. Having a detailed knowledge of all these can help individuals make an informed decision when choosing from the best Quantum hybrid mutual funds.