Hdfc Balanced Advantage Fund: Safe Investment Option?

The HDFC Balanced Advantage Fund is a mutual fund scheme that seeks to provide long-term capital appreciation and income through a dynamic mix of equity and debt investments. The fund has been in existence for over 11 years, with an expense ratio of around 0.72%, which is close to the average for similar funds. The fund's performance has been strong, with average annual returns of around 15-18% since its inception. It has a very high-risk rating and investors are warned not to invest if they need to redeem their investment in under five years.

HDFC Balanced Advantage Fund's performance and returns

The HDFC Balanced Advantage Fund is a mutual fund scheme that seeks to provide long-term capital appreciation and income through a dynamic mix of equity and debt investments. The fund management team can adjust the allocation between equity shares and bonds depending on market conditions.

As of 31 July 2023, the fund had invested 60.71% in equity, 25.8% in debt, 11.76% in cash and cash equivalents, and 1.73% in real estate. The fund's holdings are mostly in large-cap stocks and debt instruments, indicating a conservative investment strategy.

The HDFC Balanced Advantage Fund has delivered strong returns since its inception. As of 21 October 2024, the fund had an NAV of ₹546.31, with a 1-day change of -0.34%. The fund has generated a 15.98% average annual return since its inception, almost 11 years ago. The fund has doubled the money invested in it every four years.

The fund's ability to deliver consistent returns is higher than most funds in its category, and its ability to control losses in a falling market is also high. The fund's equity portion is primarily invested in the financial, energy, construction, technology, and healthcare sectors. The debt portion of the fund has low credit quality, indicating that the quality of borrowers is not too great.

The fund has an expense ratio of 0.72%, which is close to the average for Dynamic Asset Allocation funds. The minimum SIP amount for the HDFC Balanced Advantage Fund is ₹100, and there is no lock-in period.

The fund's asset allocation strategy

The HDFC Balanced Advantage Fund is a dynamic asset allocation or balanced advantage fund. This means that the fund invests in a mix of equity and fixed-income securities, with the proportion of the two being dynamically managed and varying depending on the market outlook of the fund manager.

As of 31 July 2023, the fund had invested 60.71% in equity, 25.8% in debt, 11.76% in cash and cash equivalents, and 1.73% in real estate. The fund's portfolio is largely conservative, with most of its holdings in large-cap stocks and debt instruments.

The fund's equity portion is primarily invested in the financial, energy, construction, technology, and healthcare sectors. The debt portion of the fund has a low credit quality, indicating that the quality of borrowers is not too great.

The fund's top holdings include GOI securities, HDFC Bank Ltd., ICICI Bank Ltd., and NTPC Ltd.

Risk analysis and volatility protection

In terms of risk, the HDFC Balanced Advantage Fund has been rated as "Very High Risk" according to SEBI's Riskometer. This indicates that there is a significant possibility of negative returns on the investment. The fund's performance has been volatile, with a standard deviation that is higher than its category average, suggesting less predictable returns. The fund's beta value is also higher than similar funds in the market, indicating that its performance is more volatile relative to its peers.

However, the HDFC Balanced Advantage Fund does offer some protection against volatility. Balanced Advantage funds, in general, tend to fall less than pure equity funds during stock market declines due to their debt allocation. This particular fund's portfolio is largely conservative, with a focus on Large Cap stocks and debt instruments. As of July 31, 2023, the fund had invested 60.71% in equity, 25.8% in debt, 11.76% in cash and cash equivalents, and 1.73% in real estate. This diversification across asset classes helps to mitigate risk and provide a level of protection against market volatility.

Additionally, the fund's management team actively adjusts the allocation between equity and debt based on their market outlook. This dynamic asset allocation strategy allows the fund to adapt to changing market conditions and potentially reduce losses during market downturns.

While the HDFC Balanced Advantage Fund offers some volatility protection, it is important to remember that all investments carry a degree of risk. As an investor, it is crucial to assess your risk tolerance and investment horizon before making any investment decisions. Diversification and a long-term investment horizon can also help to mitigate the impact of volatility.

The fund's portfolio and top holdings

The HDFC Balanced Advantage Fund is a mutual fund scheme that seeks to provide long-term capital appreciation and income through a dynamic mix of equity and debt investments. The fund management team can increase or decrease the allocation to equity shares depending on their market outlook. As of September 30, 2024, the fund had a 49.76% allocation to equity and 29.39% to debt.

The equity portion of the fund is primarily invested in the Financial, Energy, Construction, Technology, and Healthcare sectors. The top equity holdings of the fund include Larsen & Toubro Ltd, Reliance Industries Ltd, GOI Securities, HDFC Bank Ltd, and ICICI Bank Ltd.

The debt portion of the fund focuses on safety, liquidity, and returns, with minimal credit risk. The fund invests in sovereign securities and highly-rated (AAA) corporate bonds. As of July 31, 2023, the fund had invested 25.8% of its portfolio in debt.

The fund also utilizes derivatives to hedge the equity portion, with an exposure of 11.71% as of the February 2024 portfolio.

Overall, the HDFC Balanced Advantage Fund follows a conservative investment strategy with a focus on large-cap stocks and debt instruments. It has a track record of delivering consistently above-average returns over the long term, making it a quality fund suitable for investors with a conservative to moderate risk appetite.

How to invest in the HDFC Balanced Advantage Fund

The HDFC Balanced Advantage Fund is a mutual fund that seeks to provide long-term capital appreciation and income from a dynamic mix of equity and debt investments. The fund management team adjusts the allocation of equity shares and bonds depending on market conditions and their outlook. This fund is suitable for conservative investors as it falls less than pure equity funds when the stock markets decline.

Online

You can buy mutual funds directly from the website of the fund house. For instance, the HDFC Balanced Advantage Fund can be purchased from the HDFC Mutual Fund website. Other platforms that allow you to buy mutual funds include MF Central and MF Utility.

Through a Distributor

If you are uncomfortable with buying mutual funds online, you can seek the help of a mutual fund distributor. Most banks also act as mutual fund distributors, so you can connect with your bank for assistance.

Through ET Money

ET Money offers a fast, easy, and paperless way to invest in the HDFC Balanced Advantage Fund. You can start by clicking on the "Invest Now" button on their website, entering your email address and selecting whether you want to make a one-time investment or start a Systematic Investment Plan (SIP). Then, add the amount you want to invest and provide some additional details, including the bank account from which you will make the payment.

Through SIP

For all equity-linked investments, you must invest only through the SIP route. SIP allows you to invest a small amount periodically instead of investing a lump sum at one go. The minimum SIP amount for the HDFC Balanced Advantage Fund is ₹100.

Frequently asked questions