Why ‘highest return’ hybrid fund might not be your best bet

When investors look at mutual funds, the first thing that often catches attention is the Compounded Annual Growth Rate (CAGR). A fund showing the highest 10‑year CAGR may look like the obvious winner. But in reality, choosing a fund only on this number can be misleading.

Hybrid funds, especially aggressive ones, combine equity for growth and debt for stability. This mix helps balance risk and reward. However, the “highest return” fund is not always the most suitable. What matters more is how consistently the fund delivers returns compared to the risk taken.

Experts suggest looking beyond CAGR. Factors like the Sharpe ratio (which measures risk‑adjusted returns), expense ratio (the cost of managing the fund), and portfolio churn (how frequently the fund manager changes holdings) are equally important. A fund with slightly lower CAGR but better risk management may serve investors better in the long run.

For example, some aggressive hybrid funds show strong double‑digit returns, but their high expenses or volatile performance make them less reliable. On the other hand, funds with steady performance and lower costs can help build wealth more safely.

In short, investors should not chase only the “highest return” tag. A balanced view, considering risk, cost, and consistency, is the smarter way to select hybrid funds.