Skip to main content

HDFC Prudence Fund - Invest Online

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on

94 8300 8300

 

HDFC Prudence Fund

Balanced funds are excellent investment options for investors with moderate risk tolerance, since they give very good risk adjusted returns. It is very surprising why balanced funds are not nearly as popular as diversified equity funds, despite being around in India for nearly two decades. Balanced funds are essentially hybrid funds with both debt and equity in its portfolio mix, to balance the portfolio risk. These portfolios typically hold up to 70% of its portfolio assets in equities and the balance in fixed income. On a risk adjusted basis, balanced funds have delivered excellent returns compared to other equity fund categories, e.g. large cap or diversified equity mutual funds. The chart below shows a comparison of category returns between large cap funds and balanced funds over the time periods shown below

The above chart clearly shows that, while in terms of absolute returns the performance differential between diversified equity funds and balanced funds is not very significant, at the same time balanced funds have much lower risks compared to their diversified equity counterparts.

Within the balanced funds category, the HDFC Prudence fund has been the best performing fund in terms of last 10 years annualized returns. It has not only consistently outperformed the balanced fund category, but also outperformed many equity oriented funds during this period. See the chart below, for the comparison of annualized returns over one, three, five and ten year periods, between HDFC Prudence Fund (Growth Plan) and the balanced fund category (NAVs as on Apr 1)

HDFC Prudence Fund – Fund Overview

This fund is suitable for investors looking for long term capital appreciation with moderate levels of risk. As such the fund is suitable for investors in the moderate risk category planning for retirement or other long term financial objectives. The HDFC Prudence Fund was launched in December 1993. As one of the oldest schemes in its category, the fund has reached a huge AUM base of Rs 5,080 crores with an expense ratio of 2.02%. HDFC AMC is the largest asset management company in India, is widely recognized as amongst the best performers across most mutual fund categories. The fund is managed by industry veteran, Prashant Jain (since 2003) and Rakesh Vyas (since 2012). Prashant is known as one of the best fund managers in the industry with keen eye for buying high quality stocks at attractive valuations and holding them for long term capital appreciation. Prashant has a long term outlook and sticks to his conviction, even at the cost of short term under performance. The scheme is open both for growth and dividend options. The current NAV (as on Apr 1 2014) is 265.7 for growth option and 25.1 for dividend option.

Portfolio Construction

In terms of portfolio construction, equity comprises 75% of the portfolio mix while fixed income securities comprise the rest. The portfolio has a large cap bias with a value orientation. It is very well diversified with its top 5 holdings, Infosys, ICICI Bank, Aurbindo Pharma, Tata Motors and 8.97% coupon Government of India Bonds of 2030 maturities, accounting for less 24% of the total portfolio value. The quality of its debt portfolio is also quite high with limited interest rate sensitivity.

In terms of sector composition of the equity portfolio, BFSI, IT, Energy, Engineering and Automobile have the highest portfolio weights, combining to little less than 50% of the portfolio value. While the portfolio is slightly biased to cyclical sectors, it also has substantial allocations to defensive sectors with IT, Pharma and FMCG comprising 20% of the equity portfolio. Within the fixed income portfolio government bonds account for over 69% of the fixed income portfolio, corporate bonds account for 27% and other fixed income instruments account for the balance. See the waterfall chart below, for the sector composition of the equity portfolio of HDFC Prudence Fund.

Risk & Return

From a risk perspective, the volatility of the fund is on the higher side, given the fact that it is a balanced fund. The annualized standard deviations of monthly returns of HDFC Prudence Fund for three to fifteen year periods are in the range of 16% and 20% respectively, which is on the higher side relative to the balanced funds category. While the high volatility is a watch out for the fund from a risk perspective, the higher returns delivered by the fund over the different time periods are commensurate with the risk. See charts below for comparison of volatilities and returns between HDFC Prudence fund and balanced fund category.

Comparison with Peer Set

A comparison of annualized returns of HDFC Prudence Fund versus its peer set over various time periods shows why this fund is considered the best performer in the long term. The fund has slightly underperformed versus its top peers in the last three years, but it has outperformed all its peers in terms of trailing annualized returns in the last 5 and 10 years. See chart below for comparison of annualized returns of HDFC Prudence fund and its top performing peers over one, three, five and ten year periods. NAVs as on Apr 1 2014.

Dividend Payout Track Record

HDFC Prudence Fund (Dividend Plan) has an excellent dividend payout track record. For the last 15 years the fund has paid dividends every year. The fund did not miss paying dividends even during the market downturns in 2008 and 2011. The table below shows the dividend payout track record of the HDFC Prudence Fund (Dividend Plan)

SIP and Lump Sum Returns since Inception

The chart below shows returns as on April 1 2014 (NAV of 265.7) of Rs 5000 monthly SIP in the HDFC Prudence Fund Growth Plan, for respective years starting since inception. The SIP date has been assumed to first working day of the month. The amounts are shown in Rs lakhs.

The chart above shows that a monthly SIP of Rs 5000 started on inception of the fund would have grown to over Rs 1.35 crores, while the investor would have invested only Rs 12 lakhs. This shows the power of compounded return. If the investor started his SIP 10 years back, his investment would have grown nearly 2.5 times. The internal rate of return of the SIP investment from inception is almost 19%, which is exceptionally good, given the fact that the HDFC Prudence Fund is a balanced fund with limited downside risks. If the investor had invested Rs 1 Lakh lump sum in the NFO, his wealth would have grown to nearly Rs 27 lakhs.

Conclusion

HDFC Prudence Fund has recently completed 20 years. The fund has an established track record of strong long term performance. It is a top pick in many investor portfolios. Investors with moderate risk profiles may consider this product for their retirement planning and other long term financial objectives, through systematic investment plans or lump sum route with a long time horizon. Given its good dividend pay-out track record, investors who prefer dividends can opt for the dividend plan of the HDFC Prudence Fund. Investors should consult with their financial advisors, if this scheme is suitable for their financial planning objectives.

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund

2.Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

Franklin India High Growth Companies Fund

Franklin India High Growth Companies Fund Online One of the key developments that the Street is keenly waiting for is a cut in interest rates by Reserve Bank of India . With demand rising gradually, a rate cut is expected to boost earnings growth for companies. In such a situation, schemes which invest in high growth companies are best suited, especially when seen from a long-term perspective. One such scheme is Franklin India High Growth Companies Fund. Fund managers Anand Radhakrishnan, Roshi Jain and Srikesh Nair strictly follow valuation parameters when it comes to choosing stocks.Valuation parameters, such as enterprise value, price-to-earnings growth ratio, forward price-to-sales ratio and discounted earnings per share, play a critical role in selecting companies for investments. Taking into account these parameters, the fund managers invest in companies which are poised for high growth in their respective sectors. This approach has been in favour of the scheme and it has perform...
Read more

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...
Read more

Debt Mutual Fund Dividends are Taxable

DDT is deducted when a non-equity fund declares dividends. Equity and balanced fund dividends are tax-free The AMC is correct to deduct the dividend distribution tax (DDT) as it is mandated by tax laws. DDT in mutual funds is deducted every time a non-equity fund declares dividends. Equity fund and balanced fund dividends are tax-free . It is possible that you have invested in a non-equity fund for the first time or have received the dividend under a non-equity fund for the first time. That is why this is the first occasion when you have come across DDT.   The rate at which non-equity schemes deduct DDT has also gone up after the July 2014 budget. This is due to a change in calculation methodology. Earlier, if the fund has to declare a dividend of R 100, it used to make a provision for R 128.3, paying R 28.3 to the taxman and distributing the balance to the investor. This allowed the investor to bear less tax since the effective tax rate was 22.07 per ce...
Read more

Avoid NFOs

  Don't get taken in by the flurry of new fund offers. You will be better off sticking to the tried and tested schemes.   For the past one year, to cash in on the bull run in equities, mutual fund houses have gone on a new fund offer (NFO) overdrive. But experts are unanimous in their advice: avoid NFOs . While past performance is not an indicator of how a fund will fare in the future, it does tell the investor how skilful the fund manager is. This crucial information is missing in an NFO. Not only is there no track record to judge an NFO by, many NFOs are similar to funds that already exist. If the new fund is similar to existing funds, you are better off investing in the latter. Around 67% of the new launches in 2014 were closed-end products. Investing in the NFO of a closed-end fund is doubly risky. In case the fund's performance is lacklustre, a closed-end fund does not allow you to exit. Even though closed-end funds are listed on the stock...
Read more

Mutual Fund Exit Load Changes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now