Stay the course Hybrid Funds Let You Sleep During Crises

April 7, 2026

Sanjeev Kalra

Morgan Housel, author of the bestseller The Psychology of Money, which has sold over 10 million copies, is an expert in behavioural finance. In this book he has used 19 short stories to illustrate how to build a healthier, more sustainable relationship with money. In fact, these are 19 counterintuitive lessons about money and behaviour.

One intriguing concept in this book is that “reasonable” is preferable to “rational”; the best financial strategy is the one you can adhere to even if it isn’t mathematically ideal. “Finding the mathematically optimal investment strategies is the focus of academic finance,” he writes, “According to my theory, people in the real world prefer a strategy that maximizes their quality of sleep at night rather than one that is mathematically optimal”. When faced with a decision, he frequently quotes Warren Buffet’s maxim, “I will not trade even a night’s sleep for the chance of extra profits.”

With this beginning, I put forward the view that hybrid funds let you sleep during crises like the one we are having these days in the form of the Iran war. The Nifty 50 has fallen over 11% from its peak due to escalating geopolitical tensions.

Hybrid funds are mutual funds that invest in a mix of asset classes, typically equity (stocks) and debt (bonds) within a single portfolio, aiming for capital appreciation through stocks while minimising volatility through fixed-income security. Some common types of hybrid funds are aggressive hybrid funds, conservative hybrid funds, dynamic asset allocation funds, multi-asset allocation funds, etc.

Today my choice is one fund from the aggressive hybrid funds category, the ICICI Prudential Equity and Debt Fund.

A monthly systematic investment plan(SIP) of rupees 1000 in this fund since its inception in November 1999 would have grown to approximately rupees 4 crore as of February 28 against a total investment of rupees 31.6 lakh as per the fund house.

Launched in November 1999 as the ICICI Prudential Balanced Fund, it was renamed the ICICI Prudential Equity and Debt Fund after the mutual fund categorisation and rationalisation norms came into effect. As of February 28, 2026,the fund’s net equity exposure was around 76%, with the focus on large-cap stocks complemented by selective mid- and small-cap positions. On the debt side, it invests in high-quality instruments rated AA and above, including corporate bonds and government securities.
Sankaran Naren, ED and CIO, ICICI Prudential AMC, was quoted as saying “Hybrid funds play an important role in helping investors navigate uncertain market conditions. By dynamically balancing equity and debt based on valuations, risk-reward and macroeconomic signals,the fund has delivered consistent outcomes over time”

Aggressive hybrid funds appeal particularly to two categories of investors: newcomers to equity investing who want a comparatively smoother introduction to stock market participation, and those approaching retirement who are looking to transition their portfolios away from higher-risk and higher-volatility investments towards more conservative and less volatile options

To conclude, choose a strategy or a mutual fund scheme that lets you sleep at night and helps you remain invested for the long run because in finance the strategy you can sustain always takes you to your goal. Yes, the point is taken that for some other investors their mutual funds need not be aggressive hybrid For some of these other hybrid categories, we will discuss some other good mutual fund schemes in future.

(Sanjeev Kalra is a  retired IPS officer. He has been following mutual funds for the last 15 years. In this column, he will talk about his favourite mutual funds. His email is : [email protected])