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Investors with a long-term perspective can consider buying HDFC Balanced, a scheme which carries relatively low risk, in the light of the higher allocation made to debt instruments in its portfolio, compared with other funds in this category.
The fund has outperformed its benchmark, Crisil Balanced, and the category average over one-, three- and five-year periods.
Interestingly, the fund has also outperformed the diversified fund category over the long term. This indicates that the fund is well-positioned with a lower risk profile than diversified funds. Investors can take the SIP (systematic investment plan) route to reduce further risk and take advantage of market volatility or correction.
The fund has delivered about 20 per cent compounded annual returns over the past five years, consistently being one among the top five funds in this category. HDFC Balanced has done better than its peers such as Tata Balanced and ICICI Prudential Balanced over the long term.
Portfolio and strategyThe allocation to debt and cash is higher compared with other funds. Typically, the scheme apportions 30-35 per cent to debt instruments. The debt portion is mainly invested in Government securities. Investments are also made in high-quality financial institutions with the highest AAA rating, making it a very low-risk affair. Higher debt allocation enabled HDFC Balanced to contain downsides substantially as witnessed during the corrective phases of 2008 and 2011.
Bank, pharma and software are the top three preferred sectors of the fund. However, auto ancillaries has been given higher weightage in recent years.
The fund continues to hold stocks such as Balkrishna Industries and Motherson Sumi Systems which have eventually become multi-baggers.
It reduced its exposure to the out-of-favour construction and fertiliser sectors and exited them. It exited Coromandel International a few years ago, though it was fancied then.
Aurobindo Pharma, Larsen & Toubro, Mindtree and Greenply Industries are the other key stocks that the fund currently holds.
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