Best Sundaram Hybrid Mutual Funds

Established in 1996, Sundaram Mutual Fund is a wholly-owned subsidiary of Sundaram Finance Limited (SFL), one of India’s oldest NBFCs. They have a nationwide presence with around 90 branches in India and nearly 3.5 million customers. 

The AMC offers more than 25 mutual fund schemes in multiple segments, including debt, equity, liquid, and the best Sundaram hybrid mutual funds.

Hybrid mutual funds invest in equity stocks, bonds, and sometimes money market instruments. These funds provide an investor with the best of both worlds – equities provide healthy returns while debt instruments fortify against downturns. These are ideal for investors looking for a mix of safety, income, and decent capital appreciation. 

Thus, the best Sundaram hybrid mutual fund usually includes a mix of one or more assets classes. The fund manager of these schemes invests the funds across various classes to maximise returns and reduce the associated risks. Depending on the type of scheme, allocations may remain fixed or change based on a specific date or market conditions. 

Hybrid mutual funds are broadly segregated into equity and debt-based schemes. The former invests primarily in stocks while the latter allocates its assets to fixed-income generating instruments. However, there are further classifications based on their asset allocation and investment approach. 

Top Sundaram hybrid mutual funds

Sundaram Mutual has more than 5 schemes under its hybrid mutual funds’ category. The top Sundaram hybrid mutual funds are of the following types – 

Arbitrage fund: These schemes leverage arbitrage opportunities by simultaneously buying and selling securities in different stock exchanges. 

Aggressive hybrid: These typically invest anywhere from 65% - 80% of the equity investment and 20% - 35% in debt assets. They can be the best Sundaram hybrid mutual funds for investors seeking better returns than debt-based funds without the associated risk of pure equity schemes.

Equity saving: These try to balance returns and risk by investing in equities, debt, and derivatives. They generally invest around 65% to 100% in equity assets and 0% to 35% in debt instruments. 

Conservative hybrid: This is a suitable hybrid scheme for those looking to generate higher returns than pure debt funds. These typically invest around 75-90% in debt instruments and 10-25% in equities.

Dynamic asset allocation: These schemes can change their asset allocation between 100% equity and 100% debt asset classes based on market conditions. 

Factors to Consider Before Investing

Besides the types, it’s important to understand certain factors to choose the best Sundaram hybrid mutual funds 2023. These are:

Risk: Investment in hybrid mutual funds is not devoid of risks, and this depends on the equity and debt components. Typically, funds whose growth is enough to outpace inflation and supplement income needs can favour low-risk investment outlooks. Those who have higher risk tolerance may recognise the need for equity exposure to prevent erosion of their purchasing power. The debt component also ensures stability. So, the best Sundaram hybrid mutual funds are likely to withstand shocks during recessions. 

Returns: A hybrid fund’s returns depend on its investment’s performance. Thus, market performance and policy rates impact the performance of hybrid schemes. It’s important to note that hybrid funds don’t generate profits as well as pure equity funds. This is especially true when the market is on a bull run. 

Time: Most hybrid funds are suitable for a medium-term horizon of around 3 - 5 years. Staying invested for a longer period increases the chances of getting stable returns. One should determine their investment horizon before buying units of the best Sundaram hybrid mutual fund.

Investment route: One can invest in Sundaram hybrid mutual funds via lump-sum or SIP. The latter allows investments in fixed periodic instalments and benefits from rupee cost averaging and the power of compounding. Lump-sum lets people invest all at once, allowing investors to buy a significant number of MF units during a bearish run.

Costs: Hybrid mutual funds charge a fee, denoted as the expense ratio. The best Sundaram hybrid mutual funds will have a lower expense ratio. 

Past performance: The performance record of a specific mutual fund scheme is a major indicator of how it has fared to date under varying market conditions. It does not guarantee the future performance of the scheme.

Investment strategy: The equity component of hybrid funds generates profits by investing in stocks. Therefore, hybrid funds with higher equity components are more likely to perform well in a bull market. The bond component helps to moderate the volatility of the portfolio and creates an income stream. 

Taxability

Other than the aforesaid points, also take note of how a scheme is taxed before investing. 

Long-term Capital Gains Tax: Hybrid funds with more than 65% equity allocation in their portfolios get the same tax treatment as equity funds. If held for more than a year, they are eligible for long term capital gains (LTGC) tax at 10%. Hybrid funds investing mainly in fixed income instruments get treated as debt funds. If held for three years or more, they are eligible for 20% LTGC tax with indexation.

Short-term Capital Gains Tax: Gains from debt-based funds get added to your income if held for less than a year. These have taxations per a person’s income slab. On the other hand, short-term capital gains (STCG) on equity-oriented hybrid schemes are taxed at 15%.

Selecting the best Sundaram hybrid mutual funds may seem difficult for new investors. However, with proper research and understanding of the basic principles stated above, one can make sound financial decisions.