Aggressive Allocation Mutual Funds

Looking for a mutual fund with growth features like that of stocks but at the same time providing a certain level of security? Aggressive Allocation Mutual Funds might prove to be a top choice for you. This type of mutual funds mainly invests in stocks but a certain amount is also invested in debt instruments.

What are Aggressive Allocation Mutual Funds?

The Aggressive Allocation Mutual Funds, commonly known as Equity Hybrid Funds, are a mix of both debt and equity securities. Usually, the equity share of such mutual funds is about 65% to 80%, while the remaining is debt and money market securities.

Since there is more investment in equities, these mutual funds aim for capital gains in the long run, while the debt investment lowers the volatility in the portfolio. Thus, aggressive allocation mutual funds offer higher returns with low risk than other investment avenues.

Features of Aggressive Mutual Funds

• Equity Investment Dominance: The fund manager invests a significant amount in equities that enables the opportunity to capitalise on market growth in the long run.
• Diverse Investment Portfolio: The presence of equities as well as debt instruments in the investment portfolio reduces risk due to proper diversification.
• Professional Fund Management: Professional fund management adds value through the active management of the fund portfolio.
• Risk Management Ability: The presence of debt instruments in the portfolio enables better risk management in times of market fluctuation.
• Suitable for Long-Term Objectives: These funds are suitable for any objective such as wealth creation, old-age savings or education of kids.

How to Invest in Aggressive Allocation Mutual Funds?

You can invest in aggressive allocation mutual funds by following simple process:

Step 1: Choose investment mode. You can invest through:

• AMC websites
• Online investment platforms provided by stockbrokers
• Mutual fund distributors

Step 2: Choose a suitable aggressive allocation mutual fund.

Step 3: Choose between Systematic Investment Plan (SIP) and Lump sum based on your goal and make investment.

Step 4: Make payment through UPI, netbanking or other available methods.

Why Invest in Aggressive Allocation Mutual Funds?

• Greater Opportunity for Higher Returns: The higher equity component offers the possibility of generating higher returns in the future.
• Risk and Rewards Combination: A mixture of equities and debts makes it possible to achieve the desired balance between risks and rewards.
• Effective Tax Management: Since these funds always have higher equities exposure than the required limit, they are generally taxed like equity funds.
• Good Start for Newbies: For those investors who feel scared about putting money in equity funds, Aggressive Allocation Funds can be considered an ideal start.

Taxation Rule for Aggressive Allocation Mutual Funds

Aggressive Allocation Mutual Funds fall into the category of equity mutual funds since their equity exposure is higher. Hence, aggressive allocation mutual funds funds are subject to the laws for equity mutual fund taxation.

• Short-Term Capital Gains (STCG): If units are sold within 12 months from the date of purchase, the profits will be considered STCG, which shall be taxed at 20%, with applicable surcharge and cess.
• Long-Term Capital Gains (LTCG): Profits made from selling units after 12 months will be considered LTCG. Profits made on flexi cap funds beyond ₹1.25 lakh in a fiscal year will be taxed at 12.5%, whereas LTCG up to ₹1.25 lakh is tax-exempt.