Hybrid Long-short Mutual Funds

Are you looking for an investment opportunity that aims to generate returns while minimising market volatility? A Hybrid Long Short Fund combines the growth potential of equity investments with strategies that help manage market risks. This is an ideal choice for individuals who wish to capitalise on the market but minimise its effects.

What are Hybrid Long Short Funds?

A Hybrid Long Short Fund is a mutual fund which comprises an investment strategy involving both long and short investments using equity and debt securities.

• A long position involves buying shares that are likely to grow in price.
• A short position involves using derivatives to take advantage of shares that will fall in price or to offset market risk.

In addition, some portion of the portfolio is invested in debt securities.

Features of Hybrid Long Short Mutual Funds

• Portfolio Diversification: These mutual funds invest in equities, debt securities, and derivatives, thus diversifying their investments.
• Reduced Market Volatility: Short positions are deployed to cushion against any declines in the markets, thereby making the fund less volatile compared to equity-only funds.
• Fund Managers: The professionals involved in the management of this fund monitor market situations and make changes to the portfolio as necessary.
• Risk and Reward Balance: The inclusion of equity investments, which have a growth perspective, and debt securities provides a good balance of investments.

How to Invest in Hybrid Long Short Mutual Funds?

You can invest in hybrid long short 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 hybrid long short 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 to Invest in Hybrid Long Short Mutual Funds?

• Risk Management: The dual strategy makes this fund less vulnerable to market fall than conventional equity funds.
• Possibility of Stable Performance: By taking advantage of both rising and falling market opportunities, the fund aims to generate relatively stable returns across different market conditions.
• Best for Conservative Investors: If you want equity exposure but are concerned about market volatility, this fund can be a suitable option.

Taxation of Hybrid Long Short Mutual Funds

The tax implications of a hybrid long short fund will depend upon the equity percentage of the fund.

• If the fund has more than 65% holding in equity stocks, then it will be considered as an equity mutual fund. Under this condition, the gains will be considered as long-term capital gain and will be taxed at 12.5%.
• If the fund fails to comply with the requirement of equity, then gains from the units held for more than 24 months will attract long-term capital gain tax at 12.5%. The gain tax rate will be much lower than the income tax slab rate of an individual investor.