New Delhi, July 5 -- Aggressive hybrid funds are often overlooked by investors chasing returns in pure equity categories such as large-cap, flexi-cap or small-cap funds. Yet the category has quietly built a strong long-term performance record while following a more balanced investment approach.

Unlike diversified equity funds, aggressive hybrid funds invest 65-80% of their portfolio in equities, with the remaining allocation typically invested in debt and money market instruments. The equity portion aims to generate capital appreciation, while the debt allocation helps cushion portfolios during volatile market phases. Since these funds maintain at least 65% equity exposure, they are treated as equity funds for taxation purposes.

The lat...