The seven SEBI hybrid categories
| Category | Typical mix | In plain words |
|---|---|---|
| Conservative hybrid | 10-25% equity, 75-90% debt | Mostly debt, a little equity |
| Balanced hybrid | 40-60% equity, 40-60% debt | Even mix |
| Aggressive hybrid | 65-80% equity, 20-35% debt | Mostly equity with a debt cushion |
| Dynamic asset allocation / balanced advantage | Equity share moves with a model, often valuation-based | The fund changes the mix itself |
| Multi asset allocation | At least three asset classes, at least 10% in each | Equity, debt and gold or similar |
| Arbitrage | At least 65% equity, but hedged against price moves | Aims for low-risk, debt-like returns |
| Equity savings | At least 65% gross equity, part hedged | Lower net equity exposure |
The February 2026 circular lets some hybrid schemes keep a small residual portion in gold or silver ETFs and similar instruments, except arbitrage funds. Hybrid funds held ₹11.86 lakh crore at the end of August 2026 (AMFI).
Why people choose them
- A single fund handles rebalancing, so you do not need to sell winners and buy losers yourself.
- The debt part cushions falls, which helps investors who would otherwise sell in panic.
- They are a reasonable first step for someone new to equity.
What to watch
- The label is a range, not a promise. Check the actual equity share in the factsheet.
- "Balanced advantage" is model-driven. Two funds with the same label can behave differently.
- A cushion is not insurance. An aggressive hybrid fund can still fall sharply in a crash.
- Cost. Compare the expense ratio with simpler options.
How hybrid funds are taxed
Tax depends on the equity share, not the label:
- Equity-oriented (at least 65% in equity, including arbitrage funds and many balanced advantage funds): equity rules, 12.5% on long-term gains above ₹1.25 lakh and 20% short-term.
- Mostly debt (more than 65% in debt and money-market): taxed at slab rate on gains.
- In between: treated as other funds; check the holding-period rules for your scheme.
See capital gains on mutual funds and check the fund's own tax note.
Questions people ask
What is a hybrid fund?
A fund that mixes equity and debt in one scheme.
Are hybrid funds safer than equity funds?
Generally less volatile, but still not risk-free.
Which hybrid fund is best for beginners?
There is no single answer; an aggressive hybrid or a balanced advantage fund is a common first step. Match it to your [risk profile](/learn/glossary/risk-profile).
Are arbitrage funds taxed like equity?
Yes, they qualify as equity-oriented.
Keep going
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How we can help
Sources
- SEBI circular dated 26 February 2026 on categorisation and rationalisation
- AMFI Monthly Note, August 2026
- ICICI Prudential AMC Tax Reckoner 2025-26
- Finance Act 2024 amendment to section 50AA.
Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. This page is general education, not personal advice. Back to the full glossary