We usually invest in hybrid funds to earn better returns with lower volatility. It is the belief that, while the equity portion will cover the upside, the debt portion will provide for the downside. Now, the fact is that there’s no best fund, funds are best based on one’s expectations from their investment. Basically, to know whether your portfolio is providing value for money or not, there are different alternatives through which you can compare the performance of your fund.

We cannot really discuss them in detail but here I can discuss one of those alternatives. This involves a comparison of the performance of a particular fund with the Nifty index. This will give a clear indication that whether or not your fund is adding the value worth the cost. There are various parameters based on which you can compare performances.

First of all, the hybrid fund is a combination of equity and debt, therefore, it is important to compare the performance of any hybrid fund with a combination of an equity index fund and a simple debt fund (such as a fixed deposit or liquid fund). You can decide the desired ratio, for example, 60:40 or 65:35 say 65 of Nifty+ 35 of any liquid fund.

Another step is that you can compare the 3-year rolling returns and buy and hold data for Nifty, mutual funds, and Nifty + Liquid combination that you have considered above. You can compare your respective funds to these parameters. You can also compare 3-year rolling returns and buy and hold data for Nifty price index in place of Nifty.

While comparison based on returns is important, we cannot ignore the volatility as too much volatility under your investment can affect the judgment and can also lead to compromising with investment discipline. Therefore, ideally one would need a product with higher returns and lower volatility.

This will help you understand whether or not your fund is giving you value for money.