This website including the ‘[EduFund]’ platform is owned, operated and maintained by Helena Edtech Private Limited, a company incorporated under the laws of India. The platform and the services thereunder are provided on an "as is" basis. Use of the service and the platform is at your own risk. Company makes no warranty that the use of the service and the platform will be continuous, uninterrupted, bug-free, error-free, virus-free, free of defects, free of technical problems, nor that it will meet all of your needs. To the extent permitted by applicable law, Company expressly disclaims all other warranties, conditions, results, guarantees, or representations with respect to the service and the platform, whether express or implied, including, but not limited to, the implied warranties of merchantability, merchantable or satisfactory quality, fitness for a particular purpose, non-infringement of third party rights, or arising from the course of performance, course of dealing, or usage of trade.
Investment in securities market are subject to market risks, read all the related documents carefully before investing. The valuation of securities may increase or decrease depending on the factors affecting the securities market.
EduFund and the EduFund App are the brand and product of Helena Edtech Private Limited
“An affiliate of the Company, i.e. Samyama Advisors Private Limited, is registered with the Securities and Exchange Board of India (SEBI) as an investment adviser under the SEBI (Investment Advisers) Regulations, 2013 bearing the registration number [INA000015321]. Samyama Advisors Private Limited may provide investment advice to the clients through the Company's platform.”
Registered Address: 30, Omkar House, Near Swastik Char Rasta, Navrangpura, Ahmedabad Gujarat, India – 380009
Transaction Platform Partner : BSE Star MF (with Member code-51573). CIN No: U67100GJ2020PTC112589. RIA Number: INA000015321 GST No: 24AAFCH2122L1ZU
Debt funds vs Hybrid funds. All you need to know
As an investor, you may have heard about three broad types of funds
In this article, we will be trying to put out a comparison between debt funds and hybrid funds. We will try to differentiate them based on risks-returns and tax assessment.
Difference between Debt funds and Hybrid funds
Debt fund
A debt fund is a mutual fund, an exchange-traded fund (ETF), or any other pooled investment instrument that invests primarily in fixed-income assets. Debt funds have lower fees than equity funds due to lower management costs. Investors in debt funds can choose between passive and aggressive solutions.
Credit funds and fixed-income funds are common names for debt funds. These funds are popular among investors looking to preserve their capital, along with the generation of low-risk income.
Debt funds invest in a wide range of securities, each with its own set of risks. Companies with a steady outlook and high credit quality issue investment-grade debt. High-yield debt is usually issued by low-credit-quality businesses with good growth potential and has a larger risk-return profile.
Debt funds are appropriate for people with short to medium-term investment horizons, where “short-term” refers to 3 months to one year, and “medium-term” refers to a period of 3 to 5 years.
Hybrid funds
A hybrid fund is a mutual fund scheme that invests in a mix of equity and debt instruments to create a balance between risk and returns of the instruments mentioned above.
The risk of investing in a hybrid fund is dependent on the allocation of funds between equity and debt.
Hybrid funds obtain their returns effectively in two parts:
A comparative analysis of debt and hybrid funds
Comparison of the risk-return scale
Without a second thought, hybrid funds are riskier than debt funds because of equity components.
The riskiest ones within hybrid funds are those with more than 65% of equity exposure; among debt funds, the fund with low credit quality and high growth prospects carry a riskier profile.
Returns are dependent on the risk you take so returns will vary depending upon your separate exposure to equity and debt, though debt funds are categorically safer than a hybrid.
Comparison of the funds on the taxation scale
These funds are subject to taxation on capital gains and dividend distribution tax. Funds are categorized into equity (if equity exposure is >65%) and non-equity.
Equity funds are subject to STCG of 15% if held for less than one year and LTCG of 10% if held for more than a year. On the other hand, non-equity funds (debt funds and hybrid funds with <65% equity) are taxable according to your income-tax slab.
If held for less than three years, LTCG is payable at 15% with indexation benefit. Equity and non-equity funds attract Dividend distribution tax (DDT) of 10% and 25%, respectively.
So, while choosing the fund you wish to invest in, you have to account for your risk-return equation before deciding.
Consult an expert advisor to get the right plan for you