HDFC Prudence Fund

HDFC Prudence Fund is amongst the oldest and best managed balanced funds. This fund is managed by celebrated manager Prashant Jain right since inception. The fund’s performance has been beaten that of its peers. This is a good fund to hold on to for medium to long term.

Where does HDFC Prudence Fund invest your money?

HDFC Prudence is an equity oriented hybrid fund which invests your money in both equity securities and debt securities. It has close to 75% exposure to equity, 23% exposure to debt and close to 1% exposure to cash and cash equivalents. Its equity portion has exposure to a balanced mix of large cap and mid cap stocks. Large cap stocks are perceived to be more stable but it is the stocks of medium sized companies that bring in kicker returns. HDFC Prudence fund currently has 33.66% exposure to mid sized companies, 41.63% in large cap and 19.69% exposure to small sized companies.

The fund’s debt portion is allocated to a few corporate debentures and government securities.

Suitable for what?

The following needs if occurring between 3 and 5 years:

  • Child's Education
  • Marriage
  • Home Purchase

 

 

Not suitable for what?
  •   Long term needs
  •   Creation of wealth
How has HDFC Prudence Fund performed in the past?

If you had invested Rs 1 lakh when the fund was launched in Feb 1994, your value of investments would be around Rs 23.04 lakhs. If you had invested Rs 1 lakh five years back it would have become Rs 1.70 lakhs. The performance has been better or similar to other equity oriented hybrid mutual funds. The fund has been giving at around 11.22% every year for those who stayed invested since inception.

Assume you had invested Rs 10,000 every month in HDFC Prudence Fund through SIP since the last five years today you would have around Rs 8.47 lakhs.

How will HDFC Prudence Fund perform in the future?

Needless to say no one can predict the future of markets. We have firm belief in the future prospects of the Indian economy. If the Indian economy grows at 8% then the leading companies tend to do well. When the companies do well their stock prices follow their performance. 

So if you expect the economy to grow at 8% then you can expect top performing equity mutual funds to give you returns in excess of 12%. Debt papers are expected to give anywhere between 0.5%-3% higher returns than Fixed Deposits.

How much to invest?

Minimum one time investment is Rs 5000 and minimum SIP is Rs 500 per month. You can make HDFC Prudence Fund as a part of your portfolio that is focussed to achieve any goals expected between 3 to 5 years.

Our recommendation for fresh investment
Recommended
Our recommendation for existing investment
Recommended
When to enter?

Now! There is no good time to invest rather than now. Do not try to time the market and especially so if it is an SIP. Do not follow news channel and other experts to know the right time to invest. In the long run it does not matter. Mutual fund is unlike a stock where you are looking at the right price. This job will be done by the mutual fund scheme manager. If you have planned your investments and decided on the amount you want to invest then do not think further, just go ahead.

When to exit?

Withdraw when your goals are close to achievement. Do not remove the money when the markets go up or down. Do not panic. Stick to your goals.

How frequently you need to monitor the performance?

Once you invest in the fund do not get into the habit of checking the NAV daily or monthly. Review the performance once a year. Too much attention is not good.

What are the charges applicable?

A onetime fee of Rs 100 is charged on investments over Rs 10,000 made through distributors. If you are a first time investor in mutual funds an additional Rs 50 is charged to cover KYC expenses. This is deducted from your investment and can be skipped if you buy directly from the mutual fund via their website or offices.

If units are sold within a year an exit load of 1% is deducted from your total returns. No exit load applies for units withdrawn post one year. Expense ratio of HDFC Prudence fund is 2.24%. This is charged to recover the fund management company’s expenses on securities’ transactions, commissions, registrar fees, etc. Your mutual fund returns would be total returns less expense ratio.

What are the tax implications?

Returns on equity oriented hybrid funds are absolutely tax-free provided you do not withdraw within a year of buying the units. HDFC Prudence fund does not qualify for sec 80C ELSS benefits.

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