Best TATA Hybrid Mutual Funds

Tata Mutual Fund was incorporated in 1994 to provide individuals with investment solutions that would help them in financial planning and wealth creation. It is a part of the TATA Group.

TATA Sons Limited owns 67.91% shares of this company; whereas TATA Investment Corporation Limited holds the remaining 32.09% shares. For the quarter ending March 2021, this asset management company (AMC) has a quarterly AUM of approximately Rs.61,684 crore. Its product offerings include a diverse class of funds that enable investors to allocate their savings to various schemes based on their financial goal and risk profile. In total, it has over 150 schemes, which include the best TATA hybrid mutual funds. 

A hybrid fund invests in more than one asset classes, primarily debt and equity.  The asset allocation percentage is decided by the fund manager of a scheme who buys and sells the underlying securities to achieve the objective of a scheme in varying market conditions. 

According to the Securities and Exchange Board of India (SEBI) rules, equity-oriented hybrid funds must allocate at least 60% of the fund corpus to stocks. In contrast, the portfolio of debt-oriented funds must largely comprise fixed-income securities. The primary objective of top TATA hybrid mutual funds is to build a diversified portfolio, which reduces concentration risk. By creating a prudent mix, hybrid funds have the ability to generate higher returns than debt schemes without being as risky as pure equity funds. 

Equity-oriented and debt-oriented hybrid funds are further categorised into six types: Conservative hybrid fund, aggressive hybrid fund, balanced hybrid fund, dynamic asset allocation or balanced advantage fund, equity savings, arbitrage fund, and multi-asset allocation fund. 

TATA Mutual Fund has more than 25 hybrid schemes.

Taxability

The returns earned on these funds are taxed depending on whether they are equity-oriented or debt-oriented funds. 

Short-term Capital Gains Tax: For equity-based schemes, short-term capital gains are taxed at 15%. Whereas, in the case of debt-oriented funds, such gains are added to an investor’s taxable income and taxed as per his/her slab rate. 

Long-term Capital Gains Tax: If the long-term capital gains of equity-based hybrid funds are up to Rs.1 lakh, such returns are tax-free. The amount exceeding Rs.1 lakh is taxed at 10%. However, in the case of debt-oriented hybrid funds, a tax rate of 20% is applicable on long-term capital gains. Furthermore, investors are eligible for indexation benefits. 

Factors to Consider Before Investing

When choosing the best TATA hybrid mutual funds, it’s imperative for investors to consider certain aspects. They are discussed in detail below:

Investment goal: The returns generated by an aggressive equity-oriented mutual fund scheme will be more impacted in a bearish market when compared with a debt-based hybrid fund. The underlying debt instruments will provide stability to investors in unfavourable market conditions. However, the former may outperform the latter and generate higher returns when markets are favourable. Hence, it’s key for investors to identify their financial goals before investing in any of the best TATA hybrid mutual funds in 2023. 

Exit load: Exit load is a penalty that a fund house levies on investors if they choose to redeem their units, fully or partially, within a pre-specified period from the date of purchase. The main purpose of this charge is to discourage investors from withdrawing from a scheme prematurely. The best TATA hybrid mutual funds have different exit loads. One must make sure to know what they are before parking their funds. 

Expense ratio: The expense ratio is an fee that a fund house charges investors to cover the expenses incurred for financing the operating and administrative expenses of a fund. It includes marketing expenses, allocation charges, the salary of fund managers, etc.  The expense ratio is calculated as a small percentage of a fund’s overall assets. Hence, it’s crucial for one to compare the expense ratios of the best TATA hybrid mutual funds before they make a decision. 

Experience of the fund manager: Managing the portfolio of a hybrid mutual fund scheme is extremely complicated. Fund managers have to vary the equity-debt mix based on the current market scenario. Moreover, they have to adhere to the asset allocation limits set by SEBI. They have to take judicious buy-and-sell decisions at the right time based on research, analysis, and advanced risk and liquidity management techniques. This is where the experience of a fund manager comes into play. Someone with a proven track record has the potential to achieve the predetermined objective of the best TATA hybrid mutual funds.

Direct/regular plan: To opt for a regular plan, investors have to make the transaction via a third party, such as a broker or a distributor. However, no such third party is involved in the case of direct plans. Investors can subscribe to it directly. That’s why direct plans report higher NAVs and even have a lower expense ratio. 

Risk appetite: Equity-based hybrid funds are riskier in comparison to debt-oriented schemes as they primarily invest in stocks. The performance of even the best TATA hybrid mutual fund is impacted owing to volatile market conditions. Hence, one must assess his/her risk appetite before parting with their savings. That said, one must note that even debt-based schemes are associated with risks like credit risk, interest rate risk, inflation risk, etc. 

SIP/Lump sum: Investors can allocate their funds to a hybrid mutual fund scheme via either one of the two investment routes – Systematic investment plan (SIP) and lump sum. The first option allows investors to invest by paying fixed instalments on a monthly, quarterly, or yearly basis. Nevertheless, the lump sum route allows them to invest the entire amount available with them in the best TATA hybrid mutual funds at one go.