Why are Debt Hybrid Mutual Funds a great investment?
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28 FEBRUARY, 2023

Insurance is an essential part of any financial plan. It protects your immediate successors in case of your untimely demise and if you live a long life, the payout at the end of the plan could be large. An endowment policy fund, apart from providing life coverage, helps you get a good payout at the end of the insurance term. This corpus can be used to fund a part of your retirement savings or for buying a house. A lot of investors have chosen to invest in insurance for long-term goals.

Investors who have trusted insurance companies know the value of building a corpus for long-term goals. A major reason for choosing insurance is that it helps you to financially protect you and your loved ones. However to generate wealth which beats inflation, you should look beyond traditional forms of investment.

When we talk about maximizing wealth creation, we are not talking about taking undue risks. All we want to say is that you need to invest in products that beat inflation in the long run. A very good product that may help is a Debt Hybrid Fund.

Debt Hybrid Funds are conservative Mutual Funds that invest around 75-80% of their portfolio in government bonds, treasury bills, corporate debt like debentures and other similar low-risk instruments. Investing in such instruments, primarily backed by government, reduces the chance of default significantly. The debt investments generally generate steady income and ensure that your capital is mostly protected. The balance 20%-25% of the portfolio is invested in equities such as large cap/blue chip companies with good financial records. The equity investments give a boost to your capital gains.

A combination of debt and equity ensures that your capital is less threatened and the chances of losses are minimal compared to other aggressive funds. These funds overall are not greatly affected by volatility in the market, and that is why they are great for investors because they may secure a better return without increasing risk substantially.

Fund Name

Equity Allocation

1 Year

3 Years

5 Years

10 Years

Kotak Debt Hybrid Fund 23.60% 4.60% 9.99% 8.56% 9.28%  
SBI Conservative Hybrid Fund 21.39% 5.49% 10.18% 8.15% 8.93%  
NIFTY 50 Hybrid Composite Debt 15:85 Index   3.34% 7.70% 8.36% 8.66%  

Source: MFI Explorer | Data as on 28th February, 2023


To give an example, Kotak Debt Hybrid Fund invests ~25% in equity & remaining in debt. Out of the 75% in debt, ~70% is invested in Sovereign, AAA or equivalent rated issuers. This is ~93% of the entire debt portfolio.

You can typically look at these funds for a duration of 3-5 years. The small equity investments in these funds may help to beat inflation while the debt component tries to protect capital. Hence, such funds have the ability to give better returns than other traditional forms of deposits by taking a maximum of 25% exposure to equities. Call up your finance professional at your bank to understand these funds better and begin investing for a wealthier tomorrow.


The aforesaid is for information purposes only and should not be construed to be investment advice under SEBI (Investment Advisory) Regulations.

The calculator is only an illustration, to demonstrate the concept of compounding and should not be constructed as a promise, guarantee or a forecast of any minimum returns or future returns. Kotak Mahindra Bank does not assure any safeguard of capital and investments through SIP, does not guarantee or assure any protection against loses. #Mutual Funds are subject to market risk. Please read all scheme related documents carefully before investing. Past performance may or may not be sustained in the future

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This material is not a research report as per the SEBI (Research Analyst) Regulations, 2014. KMBL - A SEBI Registered MF Distributor. We may or may not have any relation with Kotak AMC.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Kotak Mahindra Bank Ltd., AMFI Registered Mutual Fund Distributor. ARN - 1390

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.