Balanced Funds Performance – HDFC Prudence vs HDFC Top 200

POSTED BY manish ON April 24, 2011 COMMENTS (189)

Have there been times when you thought of investing in Balanced funds like HDFC Prudence, but did not invest because you wanted to invest in pure equity funds with maximum exposure to equity? If yes, than you need to rethink this thought because balanced funds have performed superior than equity funds in some cases and given their diluted exposure to equity as compared to that of a pure equity fund, the returns are really worth considering. So here you go-

What are Balanced Funds ?

Balanced funds are Equity Mutual funds, which are not as aggressive and as pure equity diversified mutual funds and keep equity component in the range of 60%-75% and rest in Debt products or Cash. By definition you can see that Balanced funds are not exposed to equity in the same way as regular equity diversified funds whose equity exposure is generally 95% or more in an average scenario. Balanced funds keep a balance between equity and debt, with equity still being the higher component.

For example, HDFC Prudence keeps its equity allocation around 75% in most of the cases and rest 25% in debt or cash. However, Reliance Regular Savings Balanced is generally low on equity and keeps it around 60-65%, but from last some months, it has raised its equity exposure to 70%, but hasn’t touched its limit of 75% ever! . From tax point of view, any mutual fund which has equity component more than 65% is considered as “Equity Fund” and long term capital gains are exempted from tax after one year just like an pure equity equity fund .

Balanced funds Returns less risky than Pure equity mutual funds

As balanced funds are lower on equity exposure, the fall in case of market crash is lower than pure diversified funds. For example, during the financial crisis of 2008, balanced funds lost only 42% as compared with 53% drop in returns by diversified equity funds.

Lets also see another example of Reliance Regular Saving Balanced fund, its NAV was around 17.27 on 1st Jan 2008, exactly after 1 yr on 1st Jan 2009, its NAV fell to 11.26 which is 34.78% drop, where one of the best diversified equity fund from Reliance AMC called Reliance Regular Saving NAV was 30.28 on 1st Jan 2008 and it dropped to 14.05, which is 53.6% drop. After that in next 2 yrs, Reliance Regular Balanced fund has given a return of 110% , where as Reliance Regular Saving Equity gave a 137% return, which shows that Pure equity fund gave much better return than balanced funds in 2 yrs time frame (Jan 2009- Jan 2011). But the most interesting thing is to look at the 3 yrs return starting from Jan 2008 to Jan 2011, which shows that the return of Reliance Regular Balanced fund was 137% where as the return of Reliance Regular Saving Equity was 110%, which shows that if you also consider the crash of 2008 into the overall scenario, Balanced fund out performed Pure equity fund by a considerable margin.

Comparision of Returns from Reliance Regular Saving Balanced and Reliance regular Saving Equity Funds

Balanced vs Equity funds Comparision

Main Advantage of  Balanced Funds

Balanced funds have to maintain their ratios of splitting between equity and debt by fixed percentage. In order to do so, the fund has to keep on buying and selling from time to time which leads to the concept of Asset Allocation. So, if a balanced fund has a ratio of 70:30 (Equity: Debt) and suppose it reached to 77:23, the fund manage will make sure that he sells the excess part of equity to rebalance the fund back to 70:30. However in equity funds, if the ratio itself was 98:2 earlier, despite the big run in markets, the equity part will still remain around the same ratio and there is no question of asset allocation.

So the conclusion is that the asset allocation is the internal advantage available to Balanced funds which leads to superior returns over longer term, but in short term, balanced funds will not out perform pure equity based funds incase there was a bull run. You always have to give balanced funds a long time to see the performance.

Performance of Balanced Funds vs Equity Funds

Can you imagine HDFC Prudence out-performing HDFC Top 200 despite having a low equity exposure compared to HDFC Top 200? Yes, it has happened! Now let me show you some statistics which I found out.

SIP investment in HDFC Top 200 vs HDFC Prudence

Over the last 14 yrs from Jan 1997 to Mar 2011, if you had done a SIP investment of Rs. 1,000 per month in HDFC Prudence, it would have become Rs 13.6 lacs and return turns out to be 25.93% CAGR. However if you had invested the same 1,000 per month in HDFC top 200, it would have become 13.9 lacs and return turns out to be 26.20% CAGR, marginally more … Which shows that despite having much lower equity exposure, HDFC Prudence has given almost equal returns like HDFC Top 200, which in my opinion can be called out-performance. Here is the chart of how the corpus was moving in both HDFC Prudence and HDFC top 200 for 14 yrs (SIP of Rs 1,000/month).

HDFC top 200 vs HDFC Prudence comparision

Lumpsum Investments in HDFC Top 200 vs HDFC Prudence

Now let’s come to lumpsum investment. Imagine you invested Rs 1 lac in HDFC Prudence on 1st Jan 1997 and I invest the same money in HDFC Top 200 on same date. We both redeem our investments on 11th Mar 2011. Who will have more money? Answer is it would be You, You will have around Rs 24 lacs (CAGR return = 24.94%), whereas I will have approx 21 lacs (CAGR return = 23.78%). See the chart below to look at how the corpus moved per month in case of one time lumpsum investment.

HDFC top 200 vs HDFC Prudence comparision

Some more statistics on Balanced Funds

  1. In the last 10 yrs , the return from HDFC Prudence is 29.38% . Only 2 Equity Diversified funds has outperformed HDFC Prudance in true sense, which are Reliance vision and HDFC Top 200
  2. HDFC Prudence 5 yrs returns is 17.93% cagr and its more than pure equity funds (The best return is from HDFC top 200 at 17.90%)
  3. HDFC Prudence returns have outperformed all the equity diversified equity funds in 3 yrs time frame, HDFC Prudence returns for 3 years is 18.65% and the best equity diversified funds in 3 yrs time frame was Mirae Asset India Opportunities Regular with returns of 17.88%
  4. The average of top 5 balanced funds return in last 5 yrs was 15.88% (17.93 , 16.97 , 15.54 , 14.55 , 14.40) and average of top 5 equity diversified funds was 16.63% (17.9 , 17.63 , 16.88 , 15.72 , 15)
  5. The average of top 10 equity diversified funds in last 10 yrs was 27.67% , balanced funds was 22.57%

List of good Balanced Mutual Funds

List of Balanced mutual Funds

Source of Data : All the data is taken from Valueresearch , and for growth category of mutual funds , not dividend , All data as on 19/04/2011 .

Do you invest in balanced funds ? What you think it would be wise to invest in balanced funds compared to pure equity funds ? Share your thoughts on this HDFC Prudence vs HDFC Top 200 comparision which must have shown you difference between equity funds and balanced funds

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189 replies on this article “Balanced Funds Performance – HDFC Prudence vs HDFC Top 200”

  1. Utsav Jain says:

    Hi Manish,

    I am a regular follower of your blog. After reading few of your articles i have invested 30K in HDFC top 200 Growth plan and have a SIP of Rs 1000 per month in the same going Forward for one year.

    As shared by you that debt content is equally important in a portfolio, but HDFC top 200 Growth has 0% debt content.

    Please suggest me regarding the same. I have a Moderate Risk apetite with a time horizon of 25 years and a sum of 35k in hand to invest further.

    Thanks,
    Utsav Jain

    1. For now you can add that only ..

      1. Utsav Jain says:

        Thanks for your reply Manish! 🙂

        Can you please suggest me atleast one more Mutual fund apart from HDFC Top 200.

        I expect a 13-15% p.a. return with a time horizon of 25 years and a sum of 35k in hand to invest.

        Thanks,
        Utsav Jain

        1. Quantum Equity is good one

          1. Ramesh says:

            Hi manish,
            Last year I have started investing around 8K P.M thru SIP in equity funds.. Here are the funds..
            HDFC Top 200 (3000)
            Birla Sunlife Frontline Equity (3000)
            DSP Black Rock Equity Fund(2000). -> This is not doing great..
            This year I have enhanced by another 10K p.m. I have chosen these funds. I am looking for a long term investment in these (10 to 15 yrs).. Please advice if my porfolio is okay and suggest me if I need to make any corrections.. I am living in an own house and I have taken necessary steps to cover for life insurance and medical insurance for my dependants.
            HDFC Prudence Fund (2000)
            ICICI Prudential Focussed Blue Chip Fund (2000)
            Franklin India Blue chip (2000)
            SBI emerging business(2000)
            HDFC Gold Fund Growth(2000)

            Rgds

            1. Hi Ramesh

              Please take some views on our forum regarding your portfolio – http://www.jagoinvestor.com/forum

  2. Prithvi says:

    Now a days ICICI prudentila Balanced fund also in limelight. It is top rated fund for outlookmoney and valueresearchonline.

    1. Yea even that one is good now a days !

  3. AmitK says:

    Gr8 Article. As usual, i am starting bit early for tax planning for next year.

    Its been around 8-9 months, i am doing below investment

    1. HDFC Prudence: Rs. 7000
    2. Reliance Gold ETF: Rs. 3000
    3. HDFC Cash Management for left over amount.

    Do you suggest doubling the amount, as my income has increased now?

    1. Yes .. increase it !

  4. Veerendra Deshpande says:

    Hi Manish,

    Thanks for your website and inspiring articles because of which, I have started investing 5000 Rs. each in HDFC Prudence and HDFC Equity Direct Growth plan through SIP from this month.
    I was looking at the performance of these above (non direct) Funds for last five years on moneycontrol.com. I think, after 2007, Mutual Funds have not produced much exciting results. Is it unless there is not consistent growth in the market or there is a bull run Mutual Funds will not perform very well? The graph goes up and down, but does not go increasing upwards much, instead it stays almost same. The downturns in the market are coming very often now and market often looks bad. Looking at the world economy and Indian markets do you think that investing in Mutual funds or stocks is not advisable? Instead, if one takes advantage of ups and downs in the market and does trading instead of investing, will that make more financial sense? what do you say about this? Thanks in advance.

    1. I would still say that look at the long term like 10-15 yrs . Short term movements like these should not affect your original plan

  5. Veerendra Deshpande says:

    Hi Manish,

    I have strated my SIP of 5000/- p.m. in HDFC Equity Direct Growth and 5000/- p.m. in HDFC Prudence Direct Growth from last month. Finally I took an action on my plan and started to invest in Mutual Funds. Thanks to your blog and awesome articles.
    I was just checking the performance of the above two funds (without direct option) on moneycontrol.com for last 5 years. And I feel that, unless there is no bull run in the market or a continuous growth which continues for a while Mutual Funds fail to perform well. Then we just have to hope that, the kind of market condition will come and then you will get that capital appreciation. Now, looking at global financial situation, it looks like down turn and bad market conditions will occur frequently and all economies will struggle to show a consistent stable growth. I could not see the graph is going up and up in that time frame. It is going up and down but overall it’s not leading always upwards unlike market before 2008. Is it advisable to do trading by taking advantages of ups and downs and not doing long term investment? What do you say about this? Thanks in advance.

    1. Yes you can do that, but the question is Are you ready to take the risk of not able to time the market and loose the money ?

  6. Shrikanth says:

    Hi Manish,

    1. I am investing for the first time in mutual funds and after doing some research I have zeroed upon the following options :-
    (a) Franklin India Blue Chip fund ( Rs 2000 pm) for 10 years
    (b) ICICI Prudential Discovery Fund (Rs 2000 pm) for 6 years
    (c) HDFC Balanced/Prudence Fund (Rs 2000 pm) for 8 years.
    (d) Reliance equity Oppurtunity RP (Rs 1000) for 6 years.

    2. Pl forward your thoughts on my choices.

    Regards
    Shrikanth

    1. Better start with 2 funds as of now .. a and c looks good to start with

  7. shaju mathews says:

    CAN YOU SUGGEST SOME STOCK IN THE RANGE OF BELOW RS 10 FOR BULK BUYING FOR VERY LONG TERM THAT MEANS NEED TO INVEST BULK IN EVERY 6 MONTHS AND LOOK FOR BUILDING CORPUS

  8. Udayakumar says:

    Hi Manish,

    I am new to MF. I have planned to invest in these 3 funds. Can you please tell me whether the plans are rightly choosen?

    1. Franklin India Bluechip (For retirement)
    2. HDFC Prudence (For Kid’s Education)
    3. IDFC Premier Equity (For Kid’s Marriage)

    Thanks
    Udayakumar

    1. Udayakumar says:

      Amount distribution is as follows:

      1. Franklin India Bluechip (5000 / month)
      2. HDFC Prudence (3000 / month)
      3. IDFC Premier Equity (2000 / month)

    2. Yes. .these are all great funds. JUst make sure you understand their nature and the risks involved !

  9. Chethan says:

    Hi Manish,

    What is the difference between direct plan and Existing plan ?

    1. In direct plan, you will buy it directly from AMC, and there will be no AGENT, so the charges will be low and good for customer

  10. Chethan says:

    Hi Manish,

    I’m planning to start a SIP in HDFC Prudence fund and HDFC Balanced fund 1k each. ? Does it become duplicate instead should i start in one ?

    I have a demat account in Sharekhan can i charge from it or Open new one in Fundsofindia ? Does sharekhan charge extra amt or brokaregae ?

    1. You can start it from Sharekhan, regarding charges, you will have to confirm it from them only

    2. Prithvi says:

      sharekhan will not charge extra for mutual fund investments … it is one time charge for DMAT account around 500/- per year

  11. raja sekhar says:

    Hi Manish,

    Some balanced mutual funds specifying asset allocation ration in equity and debt as ” between 25:70 and 40:60 “. In these type of cases, from tax perspective, these funds needs to be treated as equity fund or not?

    Thanks,
    Raja Sekhar

    1. ONly if the equtiy part is above 60%, its treated as equity fund !

  12. Anand Sarin says:

    Manish
    I am of 25 years of age and I want to start investing Rs 2000 per month in mutual funds through SIP. I am thinking about investing through fundsindia.com. I want to invest Rs 1000 per month in HDFC Prudence. I am not so sure about the other MF to invest in. Could you suggest a good MF for this with high allocation to equity?
    Anand Sarin

    1. IDFC Premier equity is a nice aggressive fund

  13. Amit says:

    Hi Manish,
    I am thankful to you for spreading financial awareness among investors. I am regular reader of your articles and blogs. I started investing in mutual fund through SIP since last one year. Following is the list of my funds:-

    1. Reliance Gold Saving fund- Rs. 1000 pm
    2. Reliance Banking Fund – Rs. 1000 pm
    3. Reliance Pharma Fund – Rs. 2000 pm
    4. HDFC Prudence Fund – Rs. 2000 pm
    5. HDFC Balanced Fund – Rs.1000 pm
    6. SBI Magnum FMCG Fund – Rs. 2000 pm
    7. HDFC Tax saver – Rs. 100o pm( to save tax)

    Apart from funds listed above, I did lumpsum investment of 10k in Reliance Growth fund. Please review my investment and suggest me improvements.

    Thanks & Regards
    Amit

    1. Amit

      I think you are investing in too many funds. Just concentrate on 2-3 funds, thats all

      I would say HDFC Prudence Fund is appropriate one , and also start in DSPBR top 100

  14. Anand Sarin says:

    Manish

    I am of 25 years and want to invest 2000 per month in mutual funds through SIP from fundsindia.com. I am thinking of investing in two MFs , one in balanced fund (thinking about HDFC Prudence) and another in a fund with more exposure to equity (can you suggest one good MF for this?). I wanted to ask what should be my allocation to each of these funds per month, should it be 50:50? I also wanted to know what should be my time horizon for these two funds?? should it be short, medium or long term? I am asking about in which case the profits i can earn would be more?
    Anand Sarin

    1. I have already answered that some timeback on some other article

  15. Anand Sarin says:

    Manish

    I am of 25 years and want to invest 2000 per month in mutual funds through SIP from fundsindia.com. I am thinking of investing in two MFs , one in balanced fund (thinking about HDFC Prudence) and another in a fund with more exposure to equity (can you suggest one good MF for this?). I wanted to ask what should be my allocation to each of these funds per month, should it be 50:50? I also wanted to know what should be my time horizon for these two funds?? should it be short, medium or long term? I am asking about in which case the profits i can earn would be more?

    Anand Sarin

  16. Anand Sarin says:

    Manish,
    I am of 25 years age and thinking of investing of mutual funds through fundsindia.com (after reading your articles on mutual funds.). I want to invest Rs. 2000/- monthly in Mutual funds. I am thinking of investing in two mutual funds, one of balanced nature (thinking about HDFC Prudence) and another of a bit higher in risk (could you suggest one good mutual fund to me for this?). And how should i distribute the 2000 rupees in these two funds? Looking forward to hearing from you.

    Anand Sarin

    1. You can invest 1,000 in HDFC prudence and 1,000 in DSPBR Top 100

      1. Vicas says:

        Hi Manish

        I am investing both in HDFC Prudence and HDFC Top 200. Would that mean I am overlapping and not enough diversified or you think I should continue please. Thanks

        1. Can you check their top companies and how much they both are investing in them , then you can see how much are they overlapping

      2. Anand Sarin says:

        I also wanted to know what should be my time horizon for these two funds?? should it be short, medium or long term?

  17. Vivasvan says:

    Can any one advise the name of best MF?
    I would like to start SIP in MF but having no much idea.

    Thanks in Advance
    Vivasvan

    1. You can start with HDFC Prudence

  18. Anurag says:

    Hello Mahish Ji

    I read your post regularly. It is very informative to me as i have no idea about MF, Share, SIP etc. Now I am planning for a SIP with a low amount as 1000rs per month for a period of 5 to 10 year.

    There are 2 question now

    1- Is SIP period can be increased beyond its last date
    2- Which one is good to buy as I am new & have zero knowledge .

    1. 1. You can start a new SIP again
      2. Go for Balanced Funds like HDFC Prudence !

      1. Anurag says:

        Thanking very much Manish Ji to help me step in for a another way of investment. Now I am also considering a term insurance. Please suggest me a good term insurance around 50 lacks. also give also an idea about Bharti AXA. I am a non tobacco user non alcoholic. I also like your article on term insurance with return premium. it is very analytic & true

        Thanks & Regards

        1. You can go with any company, does not matter much ! .. Bharti Axa is also a good option !

  19. KRSNA says:

    which one is better sbi emerging bussiness fund or icici prudential discover fund or icici prudential discover-ip fund in growth option. please replay ur answer to my mail

    1. icici prudential discover fund would be a good fund

      1. KRSNA says:

        sir,thanks for ur replay .sbi emerging bussiness fund. from last 3 years sbi performing well rather than icici fund.hence why u preffered icici prudential discover rather than sbi emerging bussiness fund. is there any specific reason could you explain?

        1. SBI emerging is a sectoral fund mostly, but ICICI one is more of a diversified one , and for a common investor, we generally suggest to be in diversified one , do you understand what SBI emerging fund is all about and how it works ? Where does it invest , what is their phylosophy ! ?

  20. tashi tsephel says:

    mf through sip of Rs1000/ month.

  21. tashi tsephel says:

    sir,
    mf is new to me. but i want invest in mf of RS 1000 each for ten years.suggest me two good mf. wat r the approx return values after 10 years.

    thanks

    1. Tashi

      Go for HDFC Prudence and DSP BR top 100

  22. SHYAM says:

    Hi Manish,

    Thanks for your very good blog. It is very useful for investors.

    I want to invest Rs. 1 Lac in MF. So I select some fund, please suggest me that mentioned fund is good for long term (5-7 Year). My risk profile is moderately aggressive. funds are…
    DSPBR Top 100 Equity 20,000
    UTI Opportunities 20,000
    HDFC Balanced 25,000
    Birla Sun Life 95 25,000
    Quantum Long Term Equity 10,000
    And also i want invest 10k through SIP in following fund…

    ICICI Prudential Focused Blue chip Equity-G
    Canara Robeco Equity Diversified-G
    IDFC Premier Equity-G
    HDFC Equity-G
    HDFC Prudence-G

    Plz suggest any good fund.

    I want invest thorugh Fundsindia so it is safe ?

    Shyam

    1. Salil Dhawan says:

      Hi Shyam

      Fund selection from your side is goo. Only change you might consider is having one balanced fund only i.e. one among HDFC Balanced and BSL 95 fund – preferably HDFC Balanced Fund and introduce one quality small and mid cap fund , preferably – IDFC Premier Equity or HDFC Mid cap opportunities or even a Reliance Equity Opportunities fund. This will make your portfolio lot more balanced.
      Also if you want to start a SIP of 10K , why not invest in funds you are doing lumpsum. Please make sure that you do that and not duplicate fund purchases.

      As regards FundsIndia , you can invest through that. There’s no issues.

      Thanks
      Salil Dhawan

      1. SHYAM says:

        Hi Salil,

        Thank you so much for your suggestion.

        Shyam

  23. Chakri Y says:

    Hi,

    I would like to invest Rs 4000 per month in Mutual funds towards a goal which is 18 years away to accumulate approx 50 Lakhs. Expecting an approx return of 15% per annum over 18 years. Could you please suggest a good fund. My risk profile is moderately aggressive.

    I do invest in following funds for my other goals that are 10 to 12 years away from now. Could you please advise if i have chosen correct funds or do I need to make any changes.

    HDFC Top 200 – Rs 5K per month (Investing for last 3.5 years via SIP)
    DSP BR Top 100 – Rs 4K per month (Investing for last 4 years via SIP)
    IDFC Premier Equity Fund – Rs 2K per month (Investing for last 1 year via SIP)
    HDFC Equity Fund – Rs 5K per month (Investing for last 3 months via SIP)
    Quantum LT Fund – Rs 4K per month (Investing for last 3 months via SIP)

    Regards

    1. These are all good funds .. But you could have just choosen 3 instead of 5 .

      1. Chakri Y says:

        Thanks. Could you please let me know which of these ones from which i need to come out. Reason for selecting 5 funds is diversification across large cap/multi cap/midcap funds.

        1. In that case just choose HDFC Equity and DSP BR Top 100

  24. Sandeep says:

    HDFC Top 200 has always been told as good fund
    My experience in last 2 years –

    I have invested Rs 3000 every month .My total investment – Rs. 72000 . Current
    Current worth – Rs 60000

    Any comments

    1. Sandeep

      HDFC Top 200 has out performed its benchmark , if you are expecting just positive returns, you need to learn how mutual funds work !

  25. Rashmi says:

    Hi,

    I read your post and its very useful. Now, I want to invest 6k PM in mutual fund through SIP. Please suggest me on my selected fund and please let me know your view and suggestions on it. Please find the funds list below.

    DSPBR Equity Top 100
    HDFC Equity Fund
    HDFC Top 200
    UTI Opportunity Fund
    Franklin India Bluechip

    Please remove fund(s) if not good. Please share ur views.

    Rashmi

    1. Rashmi

      These are all good funds . you can invest in these

  26. amit tiwari says:

    Hi Manish,

    You are doing a good work. You are rocking.

    Please suggest me on below.

    I want to invest in mutual fund through SIP and want to invest around 10-15k per month for 5 year. I selected some fund, please suggest me that mentioned fund is good for long term. I want a good return with minimal risk. funds are…

    ICICI Focus Bluechip Equity (G)
    UTI Opportunity Fund (G)
    Franklin India Bluechip
    UTI Dividend Yeild
    IDFC Premier Equity
    Can Robeco Equity Diversified (G)

    Please tell me if i chosen a wrong fund. Please add fund name if i missed good fund in my portfolio.

    Thanks in advance.

    1. amit tiwari says:

      I forgot to mention one more fund HDFC Balance fund in my list. Please also look on it.

    2. Amit

      All these are good funds , and you dont need to add more, instead remove few of them .

      Franlin India Bluechip
      IDFC Premier Equity
      UTI Dividend Yield

      These 3 would be a good choice .

      1. amit tiwari says:

        thanks manish for your prompt reply. i will invest 5k each in suggested fund for 5 years.

        Thank you very much.

  27. Shashi says:

    Thanks Manish,
    That make sense , No doubt why every financial expert stress so much on advising investing in MF

  28. Shashi says:

    Hi Manish, Can u please explain this type of data what it means.Is the return shown is compounded or annualy. since launch it says 25.89 Is that mean if i invested 10000 at launch , the value is now 10000+2589=12589

    Returns in %
    HDFC Top 200 Since Launch 5 yr 3 yrs 1 yr
    Fund 25.89 22.06 8.53 20.86

    1. Shashi

      Its compounded yearly return , which means that each year you get that kind of return on a compounded basis , So take 5 yrs return – its 25.89% , so if you invested 1,00,000 in start , the final amount is 100000 * ( 1 + 25.89/100) ^ 5

  29. Krishna Kishore Appala says:

    Hi Manish ,

    Firstly Thanks a lot for your blog . It is really a guide for the investors. And i also bought your Jago Investor book and it was one of the best financial planning books.

    I am 23 years old and just started earning , i want to keep 5000 per month in MF.
    I listed the following funds like HDFC Top 200 , HDFC Taxsaver , HDFC Prudence.
    I can’t able to choose the one that suits my portfolio.

    1) Want to inverst for long term (Say 10 years or even more)
    2) Main objective is returns only , but if Tax savings also comes with that , then its a bonus.
    3) My risk appetite is medium.
    Please suggest me in this.

    1. Krishna

      Good to know that you have liked the blog and book as well 🙂

      1. You can invest in any fund which you mentioned to start with , Analysis paralysis is what you are suffereing with where you are delaying decision !

      2. HDFC tax saver is the answer then

      3. In long term , equity would give good returns with moderate risk .

      Manish

    2. ANIL KUMAR KAPILA says:

      Hi Krishna Kishore
      I am surprised to know your objective.Returns only can never be your objective.Long term wealth creation can be your objective for certain financial goal like retirement.
      Why have you selected all funds of one fund house?Diversification across the type of fund as well as fund houses is required to spread your risk.
      For medium risk appetite balanced funds are best.

      1. Krishna Kishore Appala says:

        Hi Anil Kumar

        Thanks for your reply and suggestion .

        Returns i mean here is accumulating good wealth only , so that i can buy a good house , or some thing like that.
        (Probably my framing of words is not correct , i think that’s why you got me wrong).

        And now talking about same fund house , is i am not going to invest in all the 3 funds. I am just asking which fund meets my requirements (any one fund).
        I got a good suggestion from Manish.

        So , whats is your opinion on this funds.
        I have stated my requirements above.

        Krishna Kishore

  30. ANIL KUMAR KAPILA says:

    Hi Manish
    If we consider the performance of HDFC Equity and HDFC Top 200 last year we will find that HDFC Balanced fund has done much better.This has done even better than HDFC Prudence. Even ICICI Prudential Balanced Fund which is not mentioned by anyone seems to have done well last year.You have rightly said that these are evergreen funds. These funds deserve more respect than what is being given.

    1. Yes Anil … Agree with you . But I think just 1 yr performance can not show anything .. What is the 3 yr and 5 yr performance comparision ?

      Manish

  31. binu says:

    Dear Manish,
    What are the exit charges on mutual funds.? I have seen terms like exit load,CDSC, stt(security transaction tax) etc. Can u help with these..
    Wont these be a big drain in returns?

    1. Binu

      Exit load is not more than .5% to 1% , rest all are form expense ratio !

  32. binu says:

    Dear Manish,
    What are the exit charges on mutual funds.? I have seen terms like exit load,CDSC, stt(security transaction tax) etc.
    Wont these be a big drain in returns?

  33. ANIL KUMAR KAPILA says:

    Hi Manish
    I think this is the best time to invest in balanced funds.We can leave the job of rebalancing to our fund managers.

    1. Anil

      Yes balanced funds are evergreen funds ! ..

  34. shiraz says:

    Hi Manish
    I plan to invest Rs 9 lakh in Hdfc Prudence fund for the next 3 years. Hi My agent says invest lumsum 9 Lakhs in Prudence. Should I invest lumsum or should I go for a SIP of Rs 25000 per month for 3 years?
    I am also considering Investing these Rs 9 Lakhs in HDFC liquid fund and do STP (systematic transfer plan ) of Rs 25000 per month to HDFC Prudence for the next 3 yrs.

    Pls suggest what option I should go ahead with and any other advise?
    Thanks

    1. harsha says:

      hi manish my name is harsha,, i having a goal in future to start with a business with just by 8 yrs,,which looking to invest 1 crore,so hw can i get 1 crore by 8 yrs,in which fund i shld invest and hw much to invest to get 1 crore within 8 yrs ,,it is posible,,my earning is 1,40000/year

      1. Harsha

        What made you think that in 8 yrs you can generate 1 crore ? It would take around 6-8 lacs of investments at minimum if you want to get 1 crore .. with 1.4 lacs of earning only , how much can you save and invest ? Just see the proportionate number , thats what you can generate in your case

        Manish

  35. vishal says:

    Hi Manish,

    I invested lumpsum of 45000 in Principal Presonal Tax saver in Oct 2007 and the started an SIP of 2000 pm from April’08 to April’09.

    The value of the 45000 lumpsump is now 21800 but calculating the divident they gave I am making a loss of about 4500 and the 2000 sip are giving me good to moderate returns.

    I may need this money after 2 years for my childs education, I am thinking to transfer this mony via SIP in a debt fund to lock the profit. Am I thinking right or there could be a better way. Also I wish if this money could appreciate.

    1. Vishal

      I think you should take out the money in lumpsum , there is no much un clarity in market right now .

      Manish

  36. Mayank Gupta says:

    One good startegy can be to accumulate equity funds when markets are trading below a PE Ratio of 18 & accumulate balanced funds when markets are trading above 20 PE Ratio as markets are above average valuation.

    1. Mayank

      Dont you think it would lead to actions too often , I thought its better to act of a more wider range , like above 22 and below 15

      Manish

  37. Ganpat says:

    Hi Manish,

    I am 35 years old and having plan of having retirement corpus of about 1 crore rupees after 20 years. In which Mutual Funds I should invest and how much per mutual fund?

    1. Ganpat

      You can choose the balance funds which we talked about or some good long term equity funds like HDFC Top 200 or DSPBR top 100

      Manish

  38. Sushant says:

    I’m 34, I have SIPs in following funds:
    SBI Contra MSFU – G – 500/-
    Reliance Growth – 500/-
    BSF Tax releif 96 – 500/-
    Fidelity Tax Adv – 500/-
    HDFC Tax saver – 1000/-

    Could you suggest some good MFs to add to this and which ones to remove from the list

  39. Punit Gohil says:

    I invested in SBI Magnum Balanced Fund (G) any idea about that?

    1. Punit

      Its a good fund , what exactly you want to know ,

  40. Praveen says:

    Very informative ..

  41. sudarshan says:

    hi manish,
    i am new to investment and read your beautiful and informative article regarding balanced and diversified funds. my question is what should be the ideal asset allocation in one’s portfolio considering investment in all classes and keeping in mind the tax saving option too.. i am 32 years old and will be shortly married and willing to take moderate risk.
    thanks,
    sudarshan

    1. Sudarshan

      In general 90:10 is good for a starter who gets EPF , 75:25 is good for a person in 30;s and 60:40 or 50:50 for some one in 40;s , you can now tell me whats ideal for a person in 60’s ?

      Overall its a function of how you think and what you are and what you want !

      Manish

  42. nikhil says:

    hi guys as the topic is balanced (equity+debt) funds……should not be there asset allocation funds where the ratio of allocation is fixed and the fund has to follow that mandate……for eg if the ratio is 70:30 (equity:debt)…..then it should remain that……so that there is automatic profit booking mechanism…..

    1. Nikhil

      No mutual funds have a mandate like 70:30 . Its always like “Equity : Upto 80%” . So asset allocation can move up and down , but generally a fund manager mantains a fixed allocation for long time which is taken for granted.

  43. jitesh says:

    Manish,

    like amol I have also found differences in calculations with SIP payment. I have also used your “Constant SIP Calculator” to calculate the return from Jan 1997 to Mar 2011 and it turns out to be for 18,33603 for HDFC Top 200 Fund. I provided the Return Expected per year as 26.20%

    There is serious difference between 18,33603 and what you written here as 13,90000. A small difference can be understood but here there is above 4 lacs difference.

    please check your calculations

    1. Jitesh

      Actually you have used the calculator which provides “monthly compounded” return , where as that 13.6 lacs is the return considering “yearly compounded” .

      Manish

      1. jitesh says:

        thanks Manish,

        Just to understand you

        With yearly compounded are u saying that 1000 per month * 12 months = 12,000 is invested at once every year and NOT on monthly basis ?

        OR 1000 is inv. on monthly basis but return is calculated once in year ?

        Where can I find such yearly compounded return calculator ?

        thanks!

  44. lpm says:

    Manish,
    One advantage compared to investing separately in equity and debt funds versus investing in a single balanced fund. Investments in debt funds have both short and long term gains tax. But a balanced fund is treated as an equity fund, i.e. the gains from debt investment portion of it is also exempt from long term gains tax !

    1. lpm

      A balanced funds is treated as a equity fund only if the equity part is more than 65% , if its less , then its debt fund

      Manish

  45. amol says:

    Manish,

    Through SIP payment of Rs. 1000 since 1 Jan 1997 into HDFC Prudence with 25.93% CAGR end up with just Rs 13.6 lacs whereas one time fix payment of 1 lac into same HDFC Prudence on 1st Jan 1997 end up with Rs 24 lacs (CAGR return = 24.94%).
    That means doing SIP wasn’t worth here(compare to one time payment) ?
    Though with SIP payment I am investing 171(months) * 1000 = Rs. 171000 still it can’t beat one time payment of Rs. 1 lac in the long run

    also, I used your constant SIP calculator to calculate final amount
    the final amount it shows it Rs. 1782086 whereas you said its Rs 13.6 lacs only.
    My inputs where
    Monthly Investment 1000
    Return Expected per year (%) 25.93
    Duration (Years) 14.25 ( included Jan 2011, feb 2011, march 2011)

    please check

    1. amol says:

      please provide your views about last part of my comment

      I used your constant SIP calculator to calculate final amount(for SIP invest). The final amount it gives is Rs. 1782086 whereas you said its Rs 13.6 lacs only for HDFC Prudence.
      My inputs where :=>
      Monthly Investment 1000
      Return Expected per year (%) 25.93
      Duration (Years) 14.25 ( included Jan 2011, feb 2011, march 2011)

    2. I would say lumpsum will always beat SIP in a very very long time frame like this and especially when the markets have to see such a high volatility .

      Do you see the same thing in smaller time frames like 3 yrs or 6 yrs ?

      Manish

      1. amol says:

        Agreed that lumpsum invest. will beat SIP in long term

        I do not have data for 3 or 6 years but dont know why the difference is so serious when calculated differently. Almost 4 lacs difference

        1. Actually you have used the calculator which provides “monthly compounded” return , where as that 13.6 lacs is the return considering “yearly compounded” .

          Manish

  46. Sravi says:

    Hello Manish,

    I became regular reader of ur blog n gone through all the posts in archive also:)Once again thanks a ton for making people understand how we can plan our future.

    I have a small question regarding HDFC Prudence balanced fund. I have checked Value research online for this MF performance. Its performing well for many years and its in top rank. But, when i checked short term ( since 6 months) its rank is almost more than 10.
    So can we consider short term performance also before start invest SIP in this MF?

    Other question is it ok to have HDFC Prudence in my portfolio as i already had HDFC Top 200 and HDFC equity in SIPs. If not, which MF can i add as balanced MF.

    Thank you.

    1. Sravi

      6 months is too small to judge , the return nad rank of a fund in that short time frame will depend on the volatility and randomness of the movement of markets and not the actual ability of fund , so better not to look at 6 months , its driven by randomness and not ability of the fund .

      Also, HDFC (Prudence/Top-200/Equity) are all managed by same fund manager (Prashant Jain) , so i would personally not like to have all in the same portfolio , better diversify across a different AMC, lets take DSPBR top 100 ?

      Manish

      1. sravi says:

        Thank yoy for the valuable comment Manish.

        1. After reading ur blog , recently i have started SIP on HDFC Equity, Top 200 annd DSP BR Top 100 for 2000 rs each. To lessen the risk factor in long term (as i have not much knowledge in MF market ) thought of adding balanced MF in my portfolio. so can you suggest me the other balanced fund (min 10% IRR) which perfroms well..

        2. Manish, suppose if market goes down and at the bad situation, what could be the minimum return we can expect from Equity diversified MF through SIP. (can we get less than 8% incase of market performs bad?)

        3. Actually, i want to invest some more amount using SIP. So you want me to add few more equity diversified MF or any balanced MF to balance my folio. (i started 6k per month in equity diversified MF , 5k per month in PPF and 2k per in gold)

        Thank you.

        1. Dr Adesh says:

          hello manish,

          i would like to know the answers of above queries of Mr. sravi as i m in same position.
          thanks again for ur wonderful post.

          Adesh.

        2. amol says:

          sravi,

          Unfortunately answer to your questions can not be in one word or one sentence. Creating a wealth in equity market has more than just selecting one such mutual fund which gives min 10% IRR as you have asked in your comment because one can always suggest you such MF for today but what comes tomorrow or after 1 year or 5 year can not predictable today.

          there are lots of factors like portfolio re balancing and reviewing periodically and taking action if required. Manish has already suggested lot of mutual funds. Use your mind to research online and take action that makes more sense also.

          – about 8% return in bad market…answer is neither yes or no. Neither manish nor anyone else can give you guarantee that bad market you will get min. 8% return. What is true is, in the long run (above 10 years in equity) using a systematic approach in MF would gives you good return.

  47. Sundar says:

    Nice article as usual.
    Recently I compared HDFC Prudence and HDFC balanced fund. I felt HDFC Balanced was slightly better than former. Mainly the debt component of later was in Bank deposits whereas the former was in Government Bonds. With current high interest rates Balanced seems to better option.

    1. Sundar

      Thats good info , I have not compared them actually , you can share more insights on this .

      Manish

  48. raj says:

    Thanks Jago Investor Team for your comment no. 52
    I have following funds
    1. HDFC Top 200——-2000.00 Large+Mid
    2. Birla Frontline eq.— 2000.00 Large+Mid
    3. UTI Div Yield——- 2000.00 Multi cap
    4. IDFC Pre.EQ——– 2000.00 Mid
    5. DSPBR 100———- 1000.00 Large
    6. REl.Regular Sav EQ-1000.00 Multi
    I think I have sufficient Large Cap funds ,hence thinking about DSPBR small & mid cap fund.Pl comment

    Raj

    1. Raj

      You have some fund which are aggresive enough , like IDFC premier equity , so dont add DSPBR , infact i think your should remove 2 funds from your portfolio and bring it down to just 3-4 funds

      Manish

  49. Vinay says:

    @ ALL.

    Its gud to invest in Balanced Funds when times are confusing, interest rates are going Northwards, like in current scenario from 2008-2011 that is the reason Balanced Fund had given better returns. But when we had Secular Bull run then Pure Equity funds will fetch better returns. (over long term).
    What’s ur view ?????

    1. Hi Vinay,

      We are not very clear on why you are saying it is good to invest in Balanced Funds when interest rates are going up ? How they are related? can you go in little detail and explain?


      Jagoinvestor Team

    2. Ajay says:

      @vinay are you talking about Debt Oriented Balanced funds ?
      HDFC prudence – Equity oriented Balanced fund has done pretty good like Manish highlighted.

  50. Krish says:

    I don’t believe in diversification and did not spread my SIPs in various MF schemes.For simplification, I am only investing in HDFC Top-200 scheme. I am happy to learn that in terms of RoR it is close to Prudence. Nevertheless, downside risk seems to be more in Top-200.

    Can we say for the beginners who wants to start SIP or for those who want to stick to one MF scheme to have less headaches and easy to monitor, all they have to do is invest in HDFC Prudence and relax.

    1. Krish,

      Thanks for your sharing what is working for your mutual fund portfolio and Yes,HDFC Top 200 anyways invests in dozen of stocks, so its enough diversification.

      Coming to your doubt, its perfectly fine for a beginner to invest in a balanced fund as it has good enough component along with limited downside which every newcomer looks for.Same is true for investors who don’t want to monitor their portfolio actively.


      Jagoinvestor Team

  51. amol says:

    Manish,

    I was waiting for such article on your blog. Happy to see it here.
    Very useful.

    Amol

    1. Amol

      Great to know that . So whats the take away learning for you from this article ?

  52. Krishna says:

    Manish,

    I have sip of 5k each in DSPBR Top100,HDFC Top 200 and HDFC Prudence.Should I exit Prudene or Top200 consider others to have diversification?.

    1. Krishna

      No I think its fine to be with all of the three , its enough diversification i know , but just dont add any more !

      Manish

      1. Krishna says:

        Manish,

        Thanks for the reply but I have 2 ELSS also Fidelity TaX Adv and CanaraRobeco is that fine?.

        Krishna

        1. Krishna

          Yea htat should be ok from returns point , the only thing you need to look is lock-in period . Becasue in non-ELSS you dont have any lock in

          Manish

  53. Krishna says:

    Manish,

    I am investing in 3 fund 5k each in DSPBR Top100,HDFC Top200, and HDFC Prudence. You mean to say I should exit either Prudence or Top200 consider other funds .

    Krishna

  54. raj says:

    thanks Salil Dhawanji
    for your reply no.08 above.
    U have suggested ICICI Focussed Bluechip as it is aggressive fund. I think i have sufficient Large Cap funds. Please comment on DSPBR small & mid cap fund & ICICI Focussed Bluechip- which should be better?

    1. Raj

      I think you need to be clear on how both the funds are little differnet from each other. DSPBR small and mid cap funds as the name suggests invests in smaller size companies which have high chances of either failing or giving amazing returns . However the other fund ICICI Focussed Bluechip is a large cap funds which has a different style of investing , they invest only in very large cap funds which are like Infosys , Reliance etc , which are so big that their upside and downside potential is not as high as small companies .

      Now see which one those fit in your investment style and beliefs ? If you are extremelly high risk taker are ready to see your money go down by even 50% in few months , then go with DSPBR , othewise you can go with the other fund , but just make sure its not too much duplication in your existing portfolio .

      btw , What are your existing funds ? lets see if there is really a need to add one more fund or we can just invest more money in one of them itself ?

      JagoInvestor Team

  55. raj says:

    thanks Manishbhai
    for your comments no.09 & 11 above

  56. Sreedhar says:

    Hi Manish,
    Good article again. I wish to point out another compelling reason to invest in balanced funds(which you have’nt mentioned.. i think you forgot to include it). The debt portion of balanced funds is completely exempt from tax. This will be more beneficial for someone who invests for a very long term in balanced funds, rather than to invest separately in pure equity funds and debt funds. Because debt funds are taxed at 11.33% without indexation benefit and at 22.66% with indexation benefit( Am I right with the numbers?? )

    1. Sreedhar

      “Debt portion of balanced funds is completely exempt from tax” . Is that not true because if balance fund has more than 65% equity , then the whole fund is treated as equity funds and the tax rules of equity applies to it , so this is the main reason why debt part does not get taxed . Does it make sense ? Can you re-check ?

      Manish

  57. Nitin Gupta says:

    Hi Manish

    To me it looks very obvious that balanced fund will outperform over equity fund if u consider time period which mostly has down period of market.
    opposite will happen if u choose time period that mostly has the period when market goes up.
    so everything depends o what time period u choose.
    yes this is a good point that that balanced fund have inherent advantage of asset allocation between equity and debt, so more chances are that, if we choose long period(having ups+ down), balanced fund will outperform over pure equity fund.
    isnt it?

    1. Nitin

      Well not always .. because you can see its not a general thing with every balanced funds , only HDFC Prudence has outperformed equiyt funds , not all balanced funds , so more than asset allocation , its the performance of the fund manager and his skills . Over long term , the ups and downs will definately favor balanced funds , but from only returns point , it might not outperform a equity fund.

      Its more of fund to fund comparion and not category comparision .

      Manish

    2. Santosh Navlani says:

      well said, Nitin.

      i was about to write the same but wasn’t having data to prove this. i just checked from our raw data of all Mutual Funds that we have to verify this claim (unfortunately, this data isn’t not available on our site:moneysights.com). and what you said is actually the case!

      and i guess its pretty obvious to reason this out as well…when the markets are in bull run or rising steadily in a specific year, an well-managed equity diversified would definitely give more return as it may have upto 95-98% invested in equities….however, when the markets are volatile or in downward trend then the debt component of a Balanced fund starts playing out.

      Hence, when one looks at long-term (more than 5-7 years or longer), the returns of a Balanced Fund seem very similar to an equity fund. But, what Manish is trying to say is that for a very passive long-term retail MF investor, s/he may be better off by investing in a Balanced Fund of the likes of HDFC Prudence…which again is right if one wants to maintain upto 60 to 75% exposure in equity. If equity allocation is higher, than its better to have a Diversified & small amount in Balanced fund to achieve desired asset allocation.

      Santosh | moneysights.com

  58. Naina says:

    No doubt HDFC Prudence fund has performed well but the same cannot be said about Balance funds per se.Most of the diversified equity funds have given better returns if time horizon is more than 5 years.

    1. Agree . We can say that risk adjusted returns of balanced funds is good , not the actual retunr always ! . you are right

      1. Naina says:

        My simple point is :ARE BALANCED FUND BETTER EQUITY FUNDS?if time horizon is more than 5 years?

        1. Naina

          If “better” means more return to you , then yes in general equity funds would outperform , but if you consider “risk” , then no !

          Manish

          1. Naina says:

            Manish Ji incidentally all the better performing funds like HDFC Equity,Tax Saver Top 200 and of course Prudence performed well since its inception under Zurich.HDFC mutual fund came into existence in 2000 and its schemes like Growth fund,Core and Satellite fund and Balanced fund have not performed better like erstwhile Zurich fund schemes.

            1. Naina

              Thanks for that information , I didnt knew it actually 🙂

              Manish

  59. Santosh Navlani says:

    Great post, Manish (as usual :)).

    i guess Reliance Regular Savings Balanced & HDFC Prudence have become sort of funds which give returns of an Equity fund & protect downside like a Balanced Fund. They have position in most retail investors’ portfolio (most, Not all!)

    However, i would still believe that one’s asset allocation for the goal/objective of investment should govern the choice of funds. For example, if one’s goal requires one to invest 80% or more in Equity for next 5-7 years, one may not be able to find a Balanced Fund that has this kind of allocation….so, the person would still need to invest a larger portion in an Equity fund and a lesser amount in Balanced Funds to ensure that target/desired asset allocation is achieved.

    Any investment one buys, needs to fit in the portfolio. One shouldn’t decide to invest in a fund & then find its role in the portfolio.

    FYI, i have both HDFC Prudence & RRS-Balanced fund in my personal portfolio….and they primarily are used to give me the required debt to achieve my asset allocation.

    Santosh | moneysights.com

    1. Santosh

      Agree with you 🙂

  60. Anand says:

    After one year, is profit from balanced funds like hdfc prudence tax free?

    I think if any fund has more than 65% invested in equity all the time, then one year returns would become tax free? I think this is very imp point to consider.

    How many balanced funds match this criteria?

    1. Anand

      Yes , atleast HDFC prudence is tax free because its exposure to equity is over 65% . There may be most also ., Check it yourself !

      Manish

  61. Sanjay says:

    Is the management cost taken into account while calculating returns? Balanced funds has usually have more management cost than equity funds.

    1. Sanjay says:

      I checked and found that there is same management cost for both funds atleast from 2009. But not sure, whether it applies for each AMC. I was amused to know that management cost is atleast 1.75% for HDFC AMC. I expected it to be around 1% .

      Does ValueResearchOnline or any other website takes into account mamagement cost into aaccount before comparing funds? I would like to know such website.

      1. Sanjay

        yes management costs (FMC) are taken into account while calculating NAV .For your info , NAV is calculated on Daily basis , 1/365’th of the FMC is cut from NAV daily 🙂 .

        Manish

      2. Santosh

        Yea agree that to get desired asset allocation of 80% , one has to mix equity + balanced into each other . But HDFC prudence is almost 75% 🙂 .

  62. Praveen says:

    WOW Awesome point.. I really said it loud when I read your analysis in ‘Main Advantage of Balanced Funds’.. Thank you so much Manish !!

    1. Praveen

      thanks , which point made you say “awesome point” ?

  63. Dr Adesh says:

    very nicely presented article manish.
    After reading ur article about balanced fund vs pure equity, my only query is whether to take equity diversified funds or we should prefer balanced funds as pointed by u?
    Since u have said in one article on “how to choose mutual funds’..to take equity diversified for long term(5-10 yrs) to have capital appreciation..but this article brings another angle..please guide.
    Keep going and God bless u.

    1. Salil Dhawan says:

      It all depends on your investment goals , time frame and your risk profile.
      Don’t just switch funds blindly without considering above factors.

      1. Dr Adesh

        You have asked a good quest aion which will be in many minds 🙂 . the answer is that you still have to choose at the end what you want , if you are only looking for long term growth in your investments and are ok with volatility , then pure equity funds are to be choosen . However if you want a marginally lesser volatile fund but good returns (which give better risk adjusted returns) , you can look at balanced funds .

        Does that help your query in any way or you want more ?

        Manish

        1. Dr Adesh says:

          yes i am getting ur point..from ur explanation i m getting that pure equity funds even if kept for long time has a inherent tendency not to bring good returns though that’s not case in 95 % cases but u can’t be 100% sure. Still my conclusion after that comparison between HDFC top 200 and HDFC prudence which u made so beautifully is that its best to…..Go for Balanced Fund in funds and arrange with golden 80 equity exposure:20 debt exposure….and enjoy Money appreciation without too much risk….Isn’t it?
          keep going..God bless u.

          1. Dr Adesh

            Yes very much , but you have to be good at choosing the good fund , HDFC Prudence has till date has been good , but might not continue forever ! . So investing in balanced funds would be less in risk , but not too much ! . if there is a big crash , even balanced funds would be down a lot , not like equity funds but ! .

            Manish

      2. Dr Adesh says:

        Salil Dhawan,
        ya ur answer is little tricky..i wanted to know the general rule..u r not wrong when u said that one must first clarify investment goals , time frame and you risk profile but that’s not quenching the thirst..i think i got my answer from Manish chauhan..
        thanks for ur response..keep answering our queries.thanks

  64. Sourabh says:

    as usual gud job Manish

    1. Salil Dhawan says:

      Yes very nicely written article

      Salil Dhawan

    2. Sourabh

      Thanks , would you like to share what was the main take away for you in this article !

      Manish

  65. Jagadees says:

    Hi Manish,
    Nice insight…. Balance fund provides automatic asset allocation and hence nice fund to hold in volatile times…..
    I found couple of mistakes in the following paragraph of the article:
    “SIP investment in HDFC Top 200 vs HDFC Prudence:
    Over the last 14 yrs from Jan 1997 to Mar 2011, if you had done a SIP investment of Rs. 1,000 per month in HDFC Top 200, it would have become Rs 13.6 lacs and return turns out to be 25.93% CAGR. However if you had invested the same 1,000 per month in HDFC top 200, it would have become 1.39 lacs and return turns out to be 26.20% CAGR, marginally more”.
    In both place u r taking about HDFC top 200, the latter should be HDFC prudence and also its returns should be 13.9 lacs not 1.39 lacs…..

    Regards
    Jagadees

    1. Jagadees

      Thanks for pointing it out , I have made the change actually 🙂 . It was HDFC Prudence at the first place (verify it from chart)

      Manish

  66. Hi Manish,
    In the paragraph “SIP investment in HDFC Top 200 vs HDFC Prudence” where you have shown the HDFC Top 200 returns it should have been 13.9 lacs instead of 1.39 lacs.

    Also your email newletters show the Kormangala, Bangalore address whereas I believe you have shifted base to Pune.

    Manish the article is very good. I always believed equity funds outperformed balanced funds, but your research has proved otherwise. But in the long run, 10 years horizon equity funds still beat balanced funds with average 27.67% returns for equity funds versus average 22.57% for balanced funds overall.

    Best Regards
    Gopal Gidwani

    1. Gopal

      I have made both the issues you pointed out . I agree that over a very long term pure equity funds would out-perform balanced fund as a whole (category wise) . However some top fund like HDFC Prudence and Reliance regular saving balanced come close to even pure funds as we saw . If you see Sharpe ratio of these balanced funds , It would be better than prue equity funds (Just an assumption, not verified actually) .

      So return provided compared to risk taken might be very attractive in balanced funds . May be you want to look into this point in detial and let us know 🙂

      Manish

  67. Marshal says:

    hey recently i came across HDFC prudence in ET not sure what was its objective. but now your post have given a good insight.. thanks once again. and keep it up..
    now my question is i already have HDFC 200 and HDFC equity, should i add one more from the same AMC? 🙂

    p.s. there is a typo in the post. it should be 13.9lacs instead of 1.39lacs (in SIP para) :).. any brownie points here.?

    1. Salil Dhawan says:

      It all depends on your overall portfolio.There are many good funds in Mutual Fund space but you can’t add each and everyone in your portfolio resulting in over-diversification. Have a look at your overall portfolio.
      In my opinion still HDFC Equity holds the top billing among the three and also make sure you don’t kind of duplicate your investments by investing in same kind of funds.

      Happy investing.

      Salil Dhawan

    2. Karun says:

      Hi Marshal,

      My suggestion would be to reduce your holding in Equity Diversified funds as of now. Wait for mkts to correct and then again enter your chosen funds.

      Its my personal opinion.

      Karun Sandha

      1. Salil Dhawan says:

        My personal suggestion to everyone will be to keep your focus in your long term goals and switch funds only and only if they are laggards over benchmark in their category for few quarters.

        Otherwise stay put and don’t rejig your portfolio.

    3. Marshal

      I agree with what Salil says below , What i want to add it HDFC Top 200 and HDFC Equity is managed by Prashant Jain , even HDFC Prudence ,so its not advisable to choose a fund which is again managed by same fund manager , while you can choose one more from HDFC with different fund manager ,there are not many !

      So better choose one from other Fund House now , what about DSPBR top 100

      1. Marshal says:

        thanks manish, salil and karun for sharing your thoughts, appreciate it!

  68. raj says:

    Manish bhai
    Thanks for your article.
    Awaiting for “Best MID cap Funds-2011”

    -Raj

    1. Raj

      Thanks . As a blogger , I would suggest never wait for it , Just find out yourself , you have all the tools . Go to valueresearch and morning star , find some best funds on 3 , 5 ,10 yr time frame and look at some numbers . you will be able to do it , I am sure 🙂 . Ask for help

      Manish

  69. raj says:

    Manish bhai
    I am investing 10000.00 per month via SIP in-
    1. HDFC 200 2.UTI Div Yield 3. IDFC Pre.Eq 4. Birla Sunlife Frontline
    Now I want to invest 2000.00 more, Please sugest any one from following
    1. HDFc Prudence 2. Rel Reg Saving bal. 3. DSPBR small & midcap fund

    1. Salil Dhawan says:

      Go for ICICI Prudential Focussed Bluechip Equity.
      It is an aggressive large cap fund.

      Salil Dhawan

    2. Raj

      What is your requirement while investing ? You are already investing in equity diversified funds ! , hence you should not add more diversified funds . HDFC Prudence is also a diversified fund , just that its equity is lower . So are you looking for more aggression ? If yes then the third fund you mentioned ( DSPBR small & midcap fund ) .

  70. pankaj vasudeo says:

    lovely post as usual

    1. Pankaj

      Thanks 🙂 . What was the take away from this post from you ?

      Manish

  71. ajay says:

    Over the last 14 yrs from Jan 1997 to Mar 2011, if you had done a SIP investment of Rs. 1,000 per month in HDFC Top 200, it would have become Rs 13.6 lacs and return turns out to be 25.93% CAGR. However if you had invested the same 1,000 per month in HDFC top 200(Should be HDFC Prudence), it would have become 1.39 lacs(13.9 lacs) and return turns out to be 26.20% CAGR, marginally more … Which shows that despite having much lower equity exposure,

    1. Ajay

      Seems like you didnt complete your comment . I assume you were pointing to the mistake I made in the article , I have already corrected it 🙂 . Was there any thing else you were point to ?

      Manish

      1. ajay says:

        Hi Manish

        Now let’s come to lumpsum investment. Imagine you invested Rs 1 lac in HDFC Prudence on 1st Jan 1997 and I invest the same money in HDFC Top 200 on same date. We both redeem our investments on 11th Mar 2011. Who will have more money? Answer is it would be me, I will have around Rs 24 lacs (CAGR return = 24.94%), whereas you will have approx 21 lacs (CAGR return = 23.78%). See the chart below to look at how the corpus moved per month in case of one time lumpsum investment- (According to your graph mentioned below these wordings, the other person should get more returns as HDFC prudent fund is giving more returns than top 200 for one time investment)

        1. Ajay

          Err .. I can see what you are pointing at . I made the change . Looks like I messed up alot in this article 🙂 . Thanks for pointing it out !

          Manish

          1. Veerendra says:

            Hi Manish,

            Excellent article as always. I started follwing Jagoinvestor quiet late, so I am catching up now. I read you other articles regarding Mutual Fund. You doing a great help to all of us.

            I am looking to invest Rs. 10,000 Per month + 1000 Rs yearly Topup through SIP in MF. I am looking for long term investment.

            I trust HDFC AMC. I am average to above average risk taker.

            Should I invest 5000 in HDFC Prudence and 5000 in HDFC Equity?
            Or 10000 in one of the above MF?

            Thanks you

            1. Your plan of splitting 5k in those 2 funds is good enough .. go ahead

            2. Veerendra says:

              Thanks for you advice Manish.

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