What are hybrid funds ?
Hybrid funds are mutual funds or exchange-traded funds (ETFs) that invest in more than one type of investment security, such as stocks and bonds. This makes hybrid funds outstanding for a stand-alone option, good funds for beginners or core holdings in a complete portfolio of mutual funds.
Also known as Balanced Funds or asset allocation funds, Hybrid Funds are mutual funds that provide a combination of more than one underlying investment asset class, such as stocks, bonds or cash. The “hybrid” descriptor comes from the idea that one mutual fund consists of a mix of different elements typically existing in two or more funds.
Most often, hybrid funds are a combination of stocks and bonds and the fund will have a stated objective, such as aggressive, moderate or conservative. Why buy mutual funds that focus on one objective or asset class when you can buy mutual funds that invest in more than one security type?
At the core of the smartest investment philosophy is diversification. Often the best mutual funds are those that have a diverse blend of holdings and hybrid funds are an excellent example of this category of investment.
There are several mutual fund families that offer balanced funds and target date retirement funds.
Conclusion :
Keep in mind the greatest strength of hybrid funds — the ability to diversify with just one mutual fund. This is why beginners can use hybrid funds to get started investing. This diversification quality also allows for use as a core holding in a portfolio of mutual funds or ETFs.
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