HDFC Long Term Advantage: INVEST

Investors looking to save on taxes by investing in equity-linked savings schemes can consider buying units of HDFC Long Term Advantage.

The fund has a track record of more than 10 years and has been a proven performer in this period.

Over one-, three- and five-year timeframes, the fund has comfortably overtaken its benchmark – Sensex — by 2-4 percentage points.

In the last five years, HDFC Long Term Advantage has delivered compounded annual returns of 23.3 per cent, placing it among the top few funds in its category. It has generally been a top-quartile performer over the years.

It has been ahead of peers, such as DSPBR Tax Saver, L&T Advantage and HDFC Tax Saver. In recent times it has also been able to deliver in line with the best funds in the category.

Though benchmarked to the Sensex, the scheme takes significant mid-cap bets in its portfolio, and exposure has generally been in quality names.

Investors can consider parking a part of their amount earmarked for tax-saving purposes in this fund. The systematic investment plan (SIP) route too, can be considered.

But it needs to be noted that each instalment is locked in for a period of three years.

Portfolio and strategy HDFC Long Term Advantage takes exposure to mid-cap stocks to the tune of 20-25 per cent of its portfolio. This has generally helped the fund benefit from broad-based market rallies. Most of its top picks though, are from the Sensex basket.

It generally falls as much or slightly less than its benchmark during corrections but delivers significant outperformance during rallies.

Banks and software have alternately been the top sectors held in the portfolio, depending on market conditions. Industrial products and automobiles & ancillaries too, figure prominently in the portfolio across market cycles.

The fund has not gone overboard on consumer non-durables in light of their rich valuations.

It has also toned down exposure to pharma stocks significantly over the past couple of years.

The stock selection is anchored in value, though the scheme does not shy away from taking exposure to premium stocks where robust earnings are visible. This includes stocks, such as TCS, HDFC and ITC.

HDFC Long Term Advantage mostly adopts a ‘buy and hold’ strategy and does not churn its portfolio aggressively.

In fact, in the last one year it has exited just three stocks, while entering into four.

The fund generally holds about 3-4 per cent in cash across timelines and market cycles, and has never held excessive cash or dented positions even during volatile markets.

Except the top few stocks, exposure to individual names has been restricted to less than five per cent. The fund maintains a compact portfolio with 35-40 stocks.

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