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- HDFC Prudence Fund - Invest Online
- No interest period in credit cards have Limited benefit
- Service history of Health Insurer is Important
| HDFC Prudence Fund - Invest Online Posted: 20 May 2014 05:09 AM PDT Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online 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
Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
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B. Large and Midcap Funds Invest Online
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2.Franklin India Smaller Companies E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
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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 |
| No interest period in credit cards have Limited benefit Posted: 20 May 2014 03:15 AM PDT Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
Credit card companies, often, dangle offers that seem irresistible. But most probably, they are not as profitable as they seem. The latest one: A no- interest period offer. This offer allows you to carry forward the outstanding amount, for a specific time without paying any interest.
This may seem very attractive, as the bank is allowing free revolving credit. But there are a few factors that customers must keep in mind, or else they could end up losing money. Let us look how this facility can be turned into a benefit.
Unnecessary spending
The option to carry forward the outstanding amount without any interest could lead the card holder to use the card recklessly and spend too much. This should be avoided.
Keep your spending under control because the amount has to be paid back at some point of time. Remember that this is not extra cash flow but is in the nature of a loan with a limited interest- free period.
Customers should take a holistic look at their ability to pay and ensure that the total spends do not cross the figure that is reasonable. If not, it can put a burden on their finances and they will find it very difficult to pay off the credit card dues. Hence, at all times, keep a tight check on the credit card spends.
Period of benefit
Keep in mind that the interest- free period is time bound. So, it could be that if your payment is due on April 15, you may get time to clear your dues by payments by May. This means that during this period if you carry forward the payment, there will be no interest charged. But if you don't clear the dues beyond that period, then the interest charges will kick in, with effect from the first payment due date. Assume the payment is due on April 15, with the no- interest period ending on May 15. If you miss the May 15 deadline, you will be charged interest from April 15. This will negate the benefit of no- interest. Banks charge very high interest rates on credit cards, usually between three to four cent per month.
On an annual basis this translates into 36- 48 per cent per year.
Minimum payment
To avail the interest- free period benefit, often the conditions will require the cardholder to pay the minimum amount. If this amount is not paid, it will be considered as a default. In such a case, the no- interest rule will not apply and the bank will start charging interest rates immediately. The minimum amount may be small, but it is important that it be paid if you want to enjoy the benefits of the no- interest period.
Don't make it a habit
The interest- free period should be treated only as a short- term measure. It should be used only in case you are short of funds in one particular month. If so, then defer payment of your credit card dues. But ensure that you have sufficient funds to pay off the dues in time for your next payment cycle. Don't make it a habit of carrying forward amounts on your credit cards because the interest costs can be very high. Remember that banks would like customers to use the revolving credit facility because that is one way for them to earn interest income. But customers must avoid this temptation.
Usage limit
All credit cards have a usage limit or spend limit, depending on the kind of card. These limits can be as low as ₹ 50,000 and could also run into lakhs of rupees for high end cards. This limit is restored after every billing cycle. But if you do not repay the outstanding, then the limit gets used up. Only when you pay the dues will the limit be restored again. So, cardholders have to be careful while deferring the payments. If you have utilised the no interest offer, and are planning a big- ticket purchase the next month, then repay on time so that the entire usage limit will be available.
When you come across such offers make sure you read the fine print very carefully. The benefit of such a facility is that it offers you an additional credit period, but there is the risk of overspending. This means incurring extra interest rate cost. It may not make much of a difference, in case your spends are not too much. Look at all these factors carefully before deciding whether to take up the offer or not.
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
Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
Best Performing Mutual Funds
B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
2.Franklin India Smaller Companies E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
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 |
| Service history of Health Insurer is Important Posted: 19 May 2014 10:26 PM PDT Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
Those opting out of TPA services won't get cashless facility; they have to follow up with company for reimbursement
While buying a health insurance policy, most compare the premium, the list of excluded diseases and the company's track record in claim settlement. Some companies offer third- party administrator (TPA) services to settle claims, while some do it in- house. Should this be a consideration while buying a policy? Also, some companies offer a discount if one doesn't opt for a TPA service. So, what are the advantages or disadvantages of a TPA? Opting out of a TPA facility means the policyholder isn't eligible for a cashless facility; the policyholder has to pay the hospital charges herself/ himself, with the insurance company subsequently reimbursing the claims. Here, there are chances the company might refuse to pay the claim, citing various reasons.
The TPA negotiates contracts with hospitals and ensures a uniform experience for customers. An advantage of this is it tends to be relatively impartial, as the TPA isn't paid on the basis of claims pay out. If the company has a good history of claim pay out and is professional, there is no need for a TPA. But if the company is very aggressive in terms of claims management, from a pure consumer- experience point of view, the TPA might be more relaxed than when the hospital handles the claims. If you are confident you can manage the claims process on your own, you don't need the TPA.
The TPA is like a relationship manager between the customer, the hospital and the insurance company
For group health insurance, most companies have TPA, as they have to handle a large number of claims. But for individual policies, some companies give customers the choice to opt out of TPA.
Even if you save money by way of lesser premium when you opt out of the TPA, if you don't get cashless facility, you will have to pay a deposit while being admitted into the hospital. So, there is a cost of finance and you have to arrange for it in advance.
For a cashless facility with TPA service, the hospital will charge customers room rent and the doctor's fee, according to the policy limit. In the case of reimbursement, the hospital might charge the customer more, as he/ she might not be aware of what the entitlement is according to the policy. That is why opting for a TPA is recommended, as the TPA will guide the customer, says an official at a public sector general insurance company. If a company doesn't have a TPA, it should ideally have in- house doctors and a parallel department for claims settlement
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
Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
Best Performing Mutual Funds
B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
2.Franklin India Smaller Companies E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
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 |
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