Investing in hybrid funds for retirement planning

After years of hard work and toil, you reach the golden age i.e., your retirement age. But the fact that your constant flow of income stops at this phase may be tough to digest. Here’s why it is important to prepare for a happy retirement life in advance. Read on to understand how investing in hybrid funds can allow you to build an adequate retirement corpus.  

  • Balance return and risk

Hybrid funds invest in both debt and equity instruments. So, by investing in the hybrid fund, you get the chance to generate higher income over a longer time-period owing to the presence of equity attributes. Simultaneously, the fund may resist market volatility owing to the presence of debt constituents. This feature makes the hybrid fund the best financial instrument to generate a retirement corpus if you are a risk-averse investor looking to get slight equity exposure in your investment portfolio.

  • Diversification

A hybrid fund provides you with the diversification feature as it combines both debt and equity instruments. When stock prices decrease, then debt constituents in hybrid fund ensure stability and capital protection, which allows you to withstand the shocks of bearish markets.

  • Suited for risk-averse investors

Risk-averse investors do not have the potential to take a high equity exposure to meet their retirement goals. Here’s where a hybrid fund i.e., a mix of debt and equity can help. A slight exposure to equity allows the risk-averse investor to gain higher returns over the long run and beat inflation while debt exposure prevents the portfolio from registering high losses due to volatility in the equity market.

  • Lower volatility

Equity mutual funds are prone to market volatility. In a volatile scenario, investors tend to panic and redeem their investments. Having debt constituents in your investment portfolio by investing in hybrid funds brings stability during volatile conditions, which allows you to earn a risk-adjusted return.

  • Active rebalancing approach

Fund managers of hybrid funds rebalance the investment portfolio as per the changing market scenarios to yield returns. Remember that they follow the purchase-and-sell approach based on the scheme’s objective.

  • SIP (systematic investment plan)

Through SIP investment, you can begin with your investment for your retirement corpus in hybrid funds with a smaller amount without the need for waiting long to accumulate a considerable corpus. With the SIP route, you get the benefit of the rupee cost averaging feature, i.e., a higher number of quality units are purchased during falling markets and a lower number of stocks are bought during rising markets, which in turn averages out your investment costs. This allows you to earn higher returns on equity constituents when the market recoups.


Investment in a ​hybrid fund may be considered by risk-averse investors. This is because hybrid funds ensure to generate risk-adjusted returns, lower volatility, and even factor in diversification and rebalancing approach.  So, it is the blend of capital appreciation, capital preservation and volatility control features that make it a go-to financial option for conservative investors to create their retirement fund over the long run.