HDFC FlexIndex Plan - Helps you overcome indecision of Investing
Srikanth Shankar Matrubai
HDFC Flexindex Plan is an unique Investment Idea which should serve Conservative and First Time Investors as a good base to enter Equities without the accompanying volatility.
HDFC Mutual Fund's "HDFC Flexindex Plan" allows you to manage your money between their funds based on how the Sensex is doing. The idea is that you associate various types of transactions with various ‘trigger levels’ of the Sensex and when the triggers are hit then those transactions are carried out. These triggers would then switch your money from debt funds to equity funds or back.
HOW IT WORKS :
Suppose you invest Rs.50000 in a HDFC Liquid Fund and then you are required to give your Entry Triggers to switch from the Liquid Fund to a predetermined Equity Fund.
You can give 4 options adding upto 100% of your investment. The Default Option is 25% at each Entry level.
Suppose Index level is say, 15000 and you give Entry Level Trigger at 25% on every fall of 500 points, Then your 50000 will be split into 25% and invested at your preferred Equity Fund at every 500 point fall.
Yes, many would argue that this goes against the Basic Concept of Mutual Fund itself wherein instead of the Fund Manager, it is the Investor who decides, as to When the Fund gets invested in Equities!. However, what should be noted that this will attract those kind of investors who are attracted towards Equities but are apprehensive about investing at these levels. So, this concept will allow an Investor the Flexibility to invest at pre-determined Sensex levels, different percentage of amount. So, timinig is left to the Investor, while Stock Selection would continue to be the work of the Fund Manager.
A Switch Plan like the "HDFC Flexindex Plan" offers the opportunity to steadily increase your exposure to equities at Different Price levels.
I would advise investors that though the "HDFC Flexindex Plan" looks and sounds good, it would be more prudent idea to invest in a Debt Fund and go for a Systematic Transfer Plan which would "time" the Market in a Efficient and Tested Way.
Also, do remember, that HDFC Flexible Plan is not a substitute to SIPs. A SIP always works out better in the long run.
Srikanth Shankar Matrubai
Also visit http://equityadvise.blogspot.com
Srikanth Matrubai is known as the WEALTH ARCHITECT. He is practitioner of Wealthy Habits and author of Amazon Best Selling Book DON'T RETIRE RICH. We strongly urge to follow your Advisor. This blog is purely for information. However, we strongly suggest you to consult a Financial adviser. This blog is purely for information purposes only and we do not take any responsibility whatsoever as the blog content may be changed from time to time and is generic in nature.
Thursday, July 30, 2009
HDFC FLEXINDEX PLAN - FOR A CAUTIOUS INVESTOR
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Good plan. Well good luck!ReplyDelete