Can hybrid mutual funds be a smart starting point for first-time investors?

If you’re someone with little or no knowledge of how the stock market works, don’t worry, you are not alone. For beginners, investing could feel overwhelming, especially with so many types of mutual funds. A popular starting point that many experts recommend is hybrid mutual funds, especially balanced or aggressive hybrid schemes. But are they the right fit for you?

Hybrid mutual funds combine different asset classes, primarily equity and debt, to offer a balance of growth and stability. They are also categorised into several types based on their asset allocation, including conservative, balanced, aggressive, dynamic asset allocation, multi-asset allocation, arbitrage, and equity savings funds.

Think of hybrid funds like a thali at a restaurant; you get a bit of everything. These funds invest in both equity (stocks) and debt (bonds), giving you the best of both worlds: the potential to grow your money and the cushion to protect it during market downturns.

“Balanced advantage funds adjust their investments depending on the market mood, more equities when prices are low and less when prices are high,” explains Jiral Mehta, senior research analyst at FundsIndia. “They use different indicators like market valuation, earnings, and government bond yields to make decisions. This dynamic approach helps during market ups and downs.”

For a beginner, this takes the pressure off. You don’t have to time the market or decide when to buy or sell—professional fund managers do that for you. So, if you’re just starting and want a relatively safe way to experience equity investing, balanced advantage funds could be a smart place to begin.

Nikunj Saraf, VP at Choice Wealth, puts it in simple terms: “These funds are like training wheels for your investment journey. They offer stability with growth. Many of my clients who were nervous about jumping into equity started with aggressive hybrid funds. It helped them understand how markets move without causing panic.”

Aggressive hybrid funds usually have a higher portion of equities (around 65-80%) compared to debt. They may offer better returns but with more risk. Yet, the debt part will act as a shock absorber if the market falls.

Sumit Bhatnagar, fund manager-equity at LIC Mutual Fund Asset Management Ltd, shares a broader view: “Hybrid funds are great for beginners. They come with built-in diversification and moderate risk. Balanced funds keep about 40-60% in equities, while aggressive ones tilt more towards stocks. Then there are multi-asset funds that even include commodities like gold and silver, adding more stability. Since fund managers handle the tough decisions, new investors can sit back and learn while their money starts working.”

So, what should you do if you are a novice investor?

Start small—but start. “Don’t wait for the ‘perfect time’—it never comes,” advises Saraf. “Use Systematic Investment Plans (SIPs) to slowly build the habit of investing and reduce the risk of timing the market. Stick to simple products such as hybrid or index funds. Don’t blindly follow friends, tips, or social media influencers.”

One’s goals should drive their investments, not the news headlines. “Talk to a real financial advisor if needed. Investing is not about overnight success—it’s a long game. The earlier you start with the right approach, the better your chances of winning,” he adds. 

Finally, Bhatnagar suggests: “Always check if the fund’s objective matches your goal. If you are not sure, consult an advisor. Hybrid funds are beginner-friendly, but understanding what you are buying into makes all the difference.”