|HYBRID FUNDS||BALANCED ADVANTAGE FUNDS (BAF)|
|Invests in debt and equities.||Combines stocks, debt and arbitrage in one portfolio.|
|Hybrid funds aim for capital appreciation in the long-run and regular income in the short-run through a balance of debt and equity.||less risky as compared with plain vanilla balanced fund. Comparable to debt funds. Normally has 30% debt, 30% equity and rest 40% as equity arbitrage.|
|Safer bets than pure equity funds. Provides better returns than pure debt funds and are a favourite among conservative investors.||BAF is able to generate returns in every market scenario – Rising, Falling and Flat. However, the returns are normally between 6-9%.|
|Hybrid funds can be differentiated as per their asset allocation. Equity oriented balanced funds (minimum 65% equity allocation) and Debt oriented balanced funds (equity component is under 65%).||BAF normally has 2 options – Growth and Dividend.|
|Hybrid funds don’t offer guaranteed returns. However, historical returns for most funds is in double digit.||
Better Return than Fixed Deposit or Debt Funds
Arbitrage provides flexibility to hedge part of its portfolio against market volatility and generates higher return than liquid or debt funds.
|The equity-oriented hybrid funds is taxed like equity funds. Debt oriented hybrid or balanced funds are taxed as debt funds.
||Provides taxation benefits as compared to debt funds. BAF is treated as equity fund for tax purposes. Long-term capital gains (over Rs 1lac) is taxed at 10% and short-term capital gains are taxed at 15%.|