Best Union Hybrid Mutual Funds

Union Mutual Fund is a part of the Union Bank of India. Incorporated in 2009, this organisation seeks to create a potential asset management system in India through the extensive network of Union Bank of India. As of March 2021, this AMC had assets under management valued at Rs.5240.41 crore.

This AMC currently offers over 15 mutual fund schemes, comprising equity, debt and hybrid funds. This includes the best Union hybrid mutual funds.

Hybrid mutual funds make investments in a mix of different asset classes. In most cases, these asset classes include debt and equity assets. Some schemes also comprise gold, real estate, and international equities in their portfolio.

The investment in both debt and equity instruments helps avoid concentration risk and achieve diversification. An appropriate mix of these two instruments makes these funds less risky than pure equity funds and generate higher returns than a standard debt fund. In most cases, hybrid funds use a balanced portfolio to generate income in the short run and achieve wealth appreciation in the long run.

Hybrid funds allocate assets based on the scheme objective and kind. Broadly, hybrid funds are of two types, namely, debt- and equity-oriented. There are further classifications under these categories. A debt-based fund will invest predominantly in debt securities, thereby offering more stable returns. An equity-oriented scheme will allocate a majority of its corpus in equity and related instruments, maximising returns. The debt component in these funds offers protection against tremendous market fluctuations, and the equity part provides a potential for earning high returns. 

Another distinct type of hybrid MF is an arbitrage fund. Fund managers buy and sell stocks in different exchanges to benefit from a price discrepancy. 

A major benefit of the best Union hybrid mutual funds is that an investor gets access to several asset classes through a single product. Union Mutual Fund offers nearly 5 schemes under this category of MF. 

Taxability

While noting these facts regarding the best Union hybrid mutual funds, one must also consider some other parameters, like their taxation.

TDS: Tax deducted at source does not apply to the capital gains arising out of hybrid mutual funds. However, dividend yields exceeding Rs.5000 attracts 10% TDS. 

Short-term Capital Gains Tax: STCG on equity-oriented hybrid mutual fund units held for shorter than 1 year attract a 15% rate. On the other hand, STCG arising from debt-based MF units held for less than 3 years are added to an individual’s taxable earnings for a financial year.

Long-term Capital Gains Tax: LTCG arising out of equity-oriented hybrid mutual funds are taxed at a 10% rate. In contrast, LTCG on debt-based hybrid funds held for more than 3 years is taxed at a 20% rate with indexation.

Factors to Consider Before Investing

Risk factor: Investors must remember that investments in the top Union hybrid mutual funds are not devoid of risk. The volatility involved in these mainly depends on the equity proportion in a portfolio. It increases with an increase in the equity component. Though the risk factor in these funds is less than that of pure equity funds, it can still be considerable for risk-averse investors. Debt-based funds are more prone to credit, interest rate, and inflationary risks. These depend on the underlying securities’ maturity terms and/or issuer. 

Returns: One must note that the best Union hybrid mutual funds 2023 do not commit guaranteed returns. The performance of underlying investments affects the NAV or Net Asset Value of the funds. Therefore, returns might fluctuate because of movements in the market or interest rates. Furthermore, they may not declare dividends during downturns in the market.

Expense ratio: It is the fee fund houses levy to account for various operating and management costs. Investors must note that a high expense ratio does not necessarily imply low returns.

Past performance of a fund: It is a highly healthy practice for investors to look into a fund’s past performance even though it does not indicate prospective returns. This is because a fund’s past performance might provide valuable insights regarding how it did under different market conditions.

Holding analysis: It refers to the assets in which a scheme invests and the proportion in which it does so. It can be a good reference point for estimating the level of risk and returns to expect from the best Union hybrid mutual funds. For instance, a fund with significant investments in low-rated bonds pose greater credit risk but hold the potential to generate sizable returns. A scheme that predominantly invests in large-cap stocks, on the other hand, will offer more stable returns and pose less risk of volatility. 

Investors might find it daunting to choose a suitable scheme out of the best Union hybrid mutual funds. However, using this article as a guide and acquiring basic knowledge about hybrid mutual funds would help to ease the task.