Skip to main content

Principal Growth Fund

 

Principal Growth Fund Invest Online

Diversified Equity Funds article in Advisorkhoj - Principal Growth Fund: Excellent returns after a superb turnaround
 

The Principal Growth Fund has given excellent returns in the last three years after a superb turnaround in performance. This diversified equity fund was underperforming for many years but a major portfolio reshuffle in 2012 saw the funds outperforming its benchmark index and most of its peers in the last three years. The chart below shows the annual returns of Principal Growth Fund (growth option) and the benchmark index, S&P BSE 200 over the last ten years from 2004 to 2013.

Diversified Equity Funds - Annual returns of Principal Growth Fund and S&P BSE 200 from 2004 - 2013

We can see that the Principal Growth fund was underperforming relative to its benchmark index, the BSE 200 till 2012. But after its turnaround in 2012, the fund has outperformed the benchmark index and the diversified equity funds category on a consistent basis. The chart below shows the trailing annualized returns of the Principal Growth Fund (growth option) and the diversified equity funds category, over the last 1 year, 3 years and 5 years time periods. Returns are based on NAVs as on October 9 2014.

Diversified Equity Funds - 1, 3 and 5 years trailing annualized returns of the Principal Growth Fund and Diversified equity funds category

Fund Overview

The Principal Growth Fund was launched in October 2010. It is a diversified equity funds which invests in a mix of large cap and midcap stocks. The fund has Rs 309 crores of assets under management. The expense ratio of the fund is 2.55%. The manager of this fund is P V K Mohan. CRISIL has ranked this fund, a "very good" performer (Rank 1). The fund is suitable for making investments towards long term financial goals, like retirement planning, children's education, wealth creation etc. The fund is open for both growth and dividend options.

Portfolio Composition

The fund has a large cap bias with a growth oriented focus. Large cap stocks comprise 65% of the portfolio, while small and midcap stocks comprise 35%. The portfolio is overweight on cyclical sectors like BFSI, Automobile & Auto Ancillaries, Oil and Gas, Metals etc. To balance its exposure to cyclical sector, the portfolio also has allocations to defensive sectors. IT, FMCG and Pharmaceuticals, comprise nearly 23% of the portfolio holdings. In a long term secular bull market cyclical sectors are expected to do well. As such, the Principal Growth Fund has the potential to deliver good returns in the medium to long term. The portfolio is very well diversified in terms of company concentration. The top 5 companies in the fund portfolio, ICICI Bank, ITC, Tata Motors, Reliance Industries Limited, and Aurobindo Pharma account for only 21% of the portfolio value. Even the top 10 companies in the fund's portfolio account for less than 35% of the portfolio holdings.

Diversified Equity Funds - Sector Composition and Top 5 Holdings of Principal Growth Fund

Risk and Return

In terms of risk measures, the annualized standard deviation of monthly returns of the Principal Growth fund is slightly on the higher side, relative to the diversified equity fund category. However, on a risk adjusted returns basis, as measured by Sharpe Ratio, the Principal Growth Fund has outperformed the diversified equity funds category. Sharpe ratio is defined as the ratio of excess return (i.e. difference of return of the fund and risk free return from Government securities) and annualized standard deviation of returns. Higher the Sharpe ratio better is the risk adjusted performance of the fund. See charts below for comparison of volatilities and Sharpe ratios of the Principal Growth Fund and the diversified equity funds category.

Diversified Equity Funds - Volatility Comparison and Sharp Ratio Comparison - Principal Growth Fund vs. Diversified equity funds category

1 lac lump sum investment in the fund NFO (growth option) would be at a value of nearly 8.8 lacs as on October 9, 2014. The lump sum annualized return since inception is 11%. The return since inception is low due to the past underperformance. However, over the last 3 years the fund gave a return of over 25% annualised. The chart below shows the growth of 1 lac lump sum investment in the Principal Growth Fund (growth option) since inception.

Diversified Equity Funds - Growth of Rs. 1 lac lump sum investment since inception in the Principal Growth Fund (growth option)

The SIP performance of the Principal Growth Fund since inception is much better than the lump sum performance. The chart below shows the returns since inception of 3000 monthly SIP in the fund (growth option). The SIP date has been assumed to first working day of the month.

Diversified Equity Funds - SIP returns since inception in the Principal Growth Fund (growth option)

The chart above shows that a monthly SIP of 3000 started at inception of the Principal Growth fund (growth option) would have grown to nearly 18.8 lacs by Sep 26 2014, while the investor would have invested in total only about 5.1 lacs. The SIP return (XIRR) is nearly 18% since inception. The good SIP return of the Principal Growth Fund since inception, despite the past underperformance, underscores the benefits of systematic investing. If the fund is able to sustain its last three years performance, the SIP returns will improve even further in the future.

Conclusion

The Principal Growth Fund has had 3 years of strong performance. This fund has definitely turned around and the outlook for the future is positive. Thus fund is suitable for investors with a long time horizon. Diversified equity funds which invest in a mix of large cap and midcap stocks are ideal for retail investors in the long term, because large cap and midcap stocks outperform one another in different market conditions. One can consider investing in the scheme both through the systematic investment plan (SIP) or lump sum route. Investors should consult with their financial advisors, if Principal Growth Fund is suitable for their investment needs.

-----------------------------------------------
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 Saving 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. Franklin India TaxShield

4. ICICI Prudential Long Term Equity Fund

5. IDFC Tax Advantage (ELSS) Fund

6. Birla Sun Life Tax Relief 96

7. DSP BlackRock Tax Saver Fund

8. Reliance Tax Saver (ELSS) Fund

9. Religare Tax Plan

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

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

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

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

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

Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

How to Pick Top Performing Mutual Fund Schemes

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   How to Pick Performing Schemes  Funds that continue to stay in the top grade of performance over longer periods are the ones to bet on, advise investment experts   The mutual fund performance charts of the past few months make for an impressive reading. Funds across all categories boast of stellar returns. Sample this: The mid and small cap category has averaged 77 percent return over the past 12 months, with the best fund delivering a staggering 120 percent. The tax-saving funds also average an impressive 51 percent, including a fund which has soared 92 percent. Many of the table-toppers are funds of proven quality and track record. However, there are also schemes that are not that well-known. Some of these have rarely made it to the performance charts in the past, yet, of late, they bo...

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...

Bharat Bond ETF

Top SIP Funds Online   The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it. The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio'). The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations. But does it make sense for you, the investor, to invest in it? Lets find out. What is the product? As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 ye...
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