A hybrid mutual fund is a mutual fund that invests in debt as well as equity assets. This helps give an investor the right mix of diversification and helps balance the inherent risk that comes with investing in equity asset class. Due to this, a hybrid mutual fund is also called a balanced fund.

The choice of hybrid fund depends on your risk-taking ability and investment objective.

Difference between equity- and debt-hybrid fund:

If the fund’s manager invests 65% or more of the fund’s capital in equity and the rest in debt, then it is an equity-oriented fund. And if the fund manager invests 65% or more in debt instruments, then the mutual fund will be called a debt-oriented fund.

Please note, the percentage invested may vary from one fund house to another. These details are clearly stated in the fund documents and hence, investors are expected to read their fund documents carefully, so they know exactly how their money is going to be invested.