Best conservative hybrid schemes to invest in 2020

Two schemes in our recommendation list - Nippon India Hybrid Bond Fund and Aditya Birla Sun Life Regular Savings Fund - have been in the last quartile for the last few months. Here is an update.

Getty Images
Here is an update on our recommended conservative hybrid schemes for November. The good news is that there are no changes in the recommendation list in this month. If you have been following our recommendations, you may continue with your investments in the schemes in the list. If you are planning to invest, you may choose the schemes from the list. However, there is an update on the poor performance of two schemes on the list.

Nippon India Hybrid Bond Fund continues to be in the fourth quartile for the last eight months. The scheme had been in the third quartile for three months before that. Aditya Birla Sun Life Regular Savings Fund is also in the fourth quartile for the last seven months. The scheme had been in the third quartile for two months before that.

  • 3.63%Annualized Return for 3 year
  • 1 – 3 yearsSuggested Investment Horizon
  • 7.0 YearsTime taken to double money
  • 8.2%Annualized Return for 3 year
  • 1 – 3 yearsSuggested Investment Horizon
  • 7.1 YearsTime taken to double money
We will keep a close watch on the performance of these schemes and update you regularly every month. Watch out for our monthly updates on our recommended schemes if you have investments in them. For more, read: Best mutual funds to invest


Coming back to conservative hybrid funds, they mostly invest mostly in debt instruments and a small part of their corpus in stocks. These schemes invest 75-90 per cent of the corpus in debt instruments and 10-25 per cent of the corpus in equity or stocks. The small equity exposure helps these schemes to deliver marginally higher returns than pure debt schemes. However, the exposure to equity also makes them riskier.

That is why these schemes are recommended to conservative investors who are ready to take a small exposure to stocks to earn a marginally higher returns than pure debt schemes. In other words, if you are a mutual fund investor who want to invest in stocks, but don't have the required risk appetite to invest in a pure equity mutual fund scheme, you may consider investing in this category.

The conservative hybrid schemes are almost like erstwhile monthly income plans or MIPs that used to invest a small part of the corpus in stocks. The trouble with MIPs was that individual schemes used to decide the equity exposure themselves. However, after the re-categorisation exercise by Sebi, the investment norms for conservative hybrid schemes are clearly defined.
ADVERTISEMENT

if you are a conservative investor looking to enhance your returns by taking a small exposure to equity, you may consider investing in conservative hybrid schemes. However, keep in mind that equity is risky, especially in the current market conditions. Do not invest in these schemes with a very short investment horizon. As you know, the equity markets are extremely volatile at the moment.

Here are our recommended conservative hybrid schemes:

Best conservative hybrid funds to invest in 2020
  • ICICI Prudential Regular Savings Fund
  • Aditya Birla Sun Life Regular Savings Fund
  • Nippon India Hybrid Bond Fund

If want to know how we have selected these schemes, you may look at our methodology stated below.
ADVERTISEMENT

Methodology:
ETMutualFunds.com has employed the following parameters for shortlisting the Hybrid mutual fund schemes.

ADVERTISEMENT
1. Mean rolling returns: Rolled daily for the last three years.

2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.
i) When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.
ii) When H <0.5, the series is said to be mean reverting.
iii) When H>0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series

3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.
X = Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z

4. Outperformance
i) Equity portion: It is measured by Jensen's Alpha for the last three years. Jensen's Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). Higher Alpha indicates that the portfolio performance has outstripped the returns predicted by the market.
Average returns generated by the MF Scheme =
[Risk Free Rate + Beta of the MF Scheme * {(Average return of the index - Risk Free Rate}
ii) Debt portion: Fund Return – Benchmark return. Rolling returns rolled daily is used for computing the return of the fund and the benchmark and subsequently the Active return of the fund.

5. Asset size: For Hybrid funds, the threshold asset size is Rs 50 crore.

(Disclaimer: past performance is no guarantee for future performance.)
Download
The Economic Times Business News App
for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App
for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
READ MORE
ADVERTISEMENT

Top Mutual Funds

3 M(%)
6 M(%)
1 YR(%)
3 YRS(%)

READ MORE:

LOGIN & CLAIM

50 TIMESPOINTS

Save with Tax planning SIP's

More from our Partners

Loading next story
Text Size:AAA
Success
This article has been saved

*

+