Investors with a long-term horizon can consider investing in Principal Growth Fund. Over the past one, three and five years, the fund has outperformed its benchmark, BSE 200.
It is also a top quartile fund across these time frames. With markets recording new highs, investors can opt for the systematic investment plan (SIP) to minimise the risk if markets were to turn volatile.
Though the fund under-performed its benchmark during market meltdowns in 2008 and 2011, it made a smart comeback in the ensuing bull market phases. For instance, in 2012, the fund outperformed its benchmark and category by a wide margin led by good performance by the banking and consumer non-durables sectors. In 2014, the fund’s outperformance was driven by banking, IT and auto.
It also delivered decent returns in the sideways market of 2013. Over the past five years, the fund has delivered an annual return of 19.5 per cent, which is 7 percentage points higher than that of the BSE 200 as well as 3.5 per cent better than the category average.
In the short-term of one-year period, too, the fund has delivered 20 per cent returns, beating its peers such as SBI Magnum Multicap, Mirae Asset India Opportunities and HSBC India Opportunities.
Performance and strategyThe rally in the equity market since February this year has helped this multi-cap fund deliver healthy returns. Its NAV has appreciated by about 14 per cent year to date.
The fund has upped its allocations over the past one year to the banking sector, which has a high weightage.
Automobiles, cement and consumer non-durables are the other top preferred sectors with equal allocation of 9 per cent to each sector.
The fund has exited mineral and textile products over the past six months. Interestingly, the fund has increased its allocation in construction projects. It has, however, reduced exposure to defensives, such as software and pharma stocks.
Principal Growth Fund does invest a small portion, 2-6 per cent of its allocations, in debt, depending on market conditions.
The fund holds more than 60 stocks in its portfolio. Excluding the top three stocks the allocation towards other individual stocks is well diffused. It invests in a blend of large-, mid- and small-cap stocks.
But the fund predominately focusses on large-caps, which mitigates the risk. The fund increased its allocation in Larsen & Toubro and added Castrol India, Bajaj Electricals and YES Bank to the portfolio recently. HDFC Bank, ICICI Bank, ITC, State Bank of India and Tata Motors are some of the large-cap stocks in the fund.