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

Am you Required to E-file Tax Return?

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   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Read more

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
Read more

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...
Read more

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...
Read more

FCCB buyback

WITH dismal share valuations causing bondholders to redeem, and not convert their foreign currency convertible bonds ( FCCBs ), which until early this year were regarded as one of the most preferred options for raising corporate debt, suddenly seem to have become millstones around the necks of issuers. It is the redemption pressure on cash-starved issuers, coupled with the need to preserve liquidity by mitigating further forex outflow, which seems to have prompted the Reserve Bank of India ( RBI ) to issue the circular permitting buyback of FCCBs. As per the circular, issuers can now buyback FCCBs under the automatic route up to any limit out of existing foreign resources or by raising fresh external commercial borrowings (ECBs,) if effected at a minimum discount of 15% on the book value. Further, FCCBs up to $50 million can be bought back with prior RBI approval out of rupee resources representing “internal accruals”, if effected at a minimum discount of 25% on the book value. 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