Hdfc Capital Builder Fund: Worth Your Investment?

The HDFC Capital Builder Value Fund is a mutual fund scheme that has been in existence for over 11 years, launched on 1 January 2013. The fund seeks to achieve capital appreciation/income in the long term by primarily investing in undervalued stocks. The fund's portfolio is largely conservative, with most of its holdings in Large Cap stocks and debt instruments. The fund has generated average annual returns of 17.68% since its launch and has an expense ratio of 0.97%. However, it is important to note that past performance may not be an indicator of future returns. As with all equity funds, it is recommended to invest only through the SIP route, and one should not invest in this fund if they need to redeem their investment in less than five years.

HDFC Capital Builder Value Fund's performance and returns

The HDFC Capital Builder Value Fund has delivered average annual returns of 17.68% since its inception in January 2013. As of 24 October 2024, the fund's Net Asset Value (NAV) was 806.334, with a 1-day change of -0.37%. The fund has consistently outperformed its category average over the past 1 and 3 years, with a 1-year return of 44.37%.

The fund's performance is rated as average compared to other funds in its category, and it has a Value Research rating of 3.0. The fund's portfolio is considered conservative, with most holdings in Large Cap stocks and debt instruments. The fund has a Very High-risk rating and an expense ratio of 1.83% or 1.89%, depending on the source.

The HDFC Capital Builder Value Fund seeks to achieve capital appreciation and income in the long term by investing primarily in undervalued stocks. It has a minimum investment amount of ₹100 and no lock-in period.

HDFC Capital Builder Value Fund's investment strategy

The HDFC Capital Builder Value Fund seeks to achieve capital appreciation and income in the long term by primarily investing in undervalued stocks. The fund follows a value/contrarian style of investing, which means it aims to find stocks that are priced significantly lower than their true worth.

The fund's portfolio is largely conservative, with most of its holdings in Large Cap stocks and debt instruments. As of September 30, 2024, the fund had invested 99.59% in domestic equities, with 57.78% in Large Cap stocks, 11.04% in Mid Cap stocks, and 14.81% in Small Cap stocks. The fund's top holdings include ICICI Bank Ltd., HDFC Bank Ltd., Bharti Airtel Ltd., Infosys Ltd., and Axis Bank Ltd.

The fund has an expense ratio of 0.97%, which is close to what most other Value-Oriented funds charge. It has an exit load of 1% if redeemed within 1 year. The fund is suitable for investors with advanced knowledge of macro trends who are willing to take on the possibility of moderate to high losses.

In terms of returns, the HDFC Capital Builder Value Fund has generated the highest return among Value-Oriented funds in the last 1 year. However, its overall performance is mixed. While it has consistently delivered average annual returns of 17.68% since its inception in 2013, its ability to control losses in a falling market is average.

HDFC Capital Builder Value Fund's risk analysis

The HDFC Capital Builder Value Fund is considered a high-risk investment option. According to SEBI's Riskometer, the fund is rated as "Very High Risk". This rating indicates that the fund may experience significant fluctuations in value and carries a higher level of risk compared to other investment options.

When considering investing in the HDFC Capital Builder Value Fund, it is important to keep in mind the suggested investment horizon of more than 3 years. This is because the fund's returns can be volatile in the short term, and investing for a longer period can help reduce the downside risk and make the returns more predictable.

In terms of risk-adjusted performance, the HDFC Capital Builder Value Fund has underperformed compared to its peers. The fund has a Sharpe Ratio of 1.17 vs. 8.25, indicating that it provides poorer risk-adjusted returns. Additionally, the fund has a Treynor ratio of 4.6 vs. 10.12, suggesting that it offers less favourable risk-adjusted returns.

The fund's sensitivity to market changes is measured by its Beta, which is currently 1.01 vs. 1.55. This indicates that the fund is slightly less volatile than the market, with a Beta value slightly below 1. However, it is important to note that the fund's standard deviation, which measures the volatility of its returns, is higher at 13.09 vs. 11.73, making it a riskier investment option.

Overall, while the HDFC Capital Builder Value Fund has the potential for high returns, it also carries a higher level of risk. It is important for investors to carefully consider their risk tolerance and investment goals before deciding to invest in this fund. Diversifying your investments and consulting with a financial advisor can help mitigate some of the risks associated with high-risk funds.

HDFC Capital Builder Value Fund's tax implications

When considering investing in the HDFC Capital Builder Value Fund, it is important to understand the associated tax implications. Here is a detailed overview of the tax implications for this fund:

Short-Term Capital Gains Tax

If you redeem or sell your mutual fund units within one year from the date of investment, your gains will be subject to Short-Term Capital Gains Tax (STCG). The current tax rate for STCG is 20%. It is important to note that any cess or surcharge is not included in this rate.

Long-Term Capital Gains Tax

If you redeem or sell your mutual fund units after one year from the date of investment, Long-Term Capital Gains Tax (LTCG) will apply. The current LTCG tax rate is 12.5% if your total long-term capital gains exceed 1.25 lakh rupees in a financial year. Similar to STCG, any cess or surcharge is not included in this rate.

Dividend Taxation

Dividends received from the HDFC Capital Builder Value Fund are added to the income of the investors and taxed according to their respective income tax slabs. Additionally, if an investor's dividend income exceeds 5,000 rupees in a financial year, the fund house will deduct a Tax Deducted at Source (TDS) of 10% before distributing the dividend.

Exit Load

The HDFC Capital Builder Value Fund also has an exit load of 1% if the units are redeemed within one year from the date of investment. This means that if you withdraw your investment before completing one year, you will be charged a fee of 1% of the redemption amount.

Taxation of Mutual Fund Units on Sale

When you sell your mutual fund units, the capital gains are taxed based on the holding period. If the units are sold after one year, gains up to 1 lakh rupees in a financial year are exempt from tax. Gains exceeding 1 lakh rupees are taxed at a rate of 10%. If the units are sold within one year, the entire amount of gain is taxed at a rate of 15%.

No Tax on Holding Units

It is important to note that as long as you continue to hold your mutual fund units without redeeming them, there is no tax liability. Taxation only occurs when you sell or redeem your units.

HDFC Capital Builder Value Fund's investment procedure

HDFC Capital Builder Value Funds investment procedure

The HDFC Capital Builder Value Fund is a mutual fund scheme that seeks to achieve capital appreciation and income in the long term by primarily investing in undervalued stocks. The fund has been in existence for over 11 years, with an expense ratio of 0.97%, which is close to the average for Value-Oriented funds. The fund has generated average annual returns of 17.68% since its launch and has doubled investors' money every four years.

To invest in the HDFC Capital Builder Value Fund, you can follow these steps:

• Visit the website of HDFC Mutual Fund or platforms like MF Central or MF Utility.
• Click on the "Invest Now" button, typically located on the top right-hand side of the page.
• Enter your email address and choose whether you want to make a one-time investment or start a Systematic Investment Plan (SIP). Specify the amount you wish to invest.
• Provide additional details, including the bank account from which you will make the payment.
• Confirm your investment.

It is important to note that HDFC Capital Builder Value Fund is considered a high-risk investment. As per SEBI's Riskometer, it has a "Very High Risk" rating. Therefore, it is recommended to invest in this fund only if you have a high-risk appetite and are comfortable with potential losses.

Additionally, when investing in this or any other value-oriented fund, it is advisable to stay invested for at least five years to avoid potential losses.

Frequently asked questions