Thursday, December 31, 2015


If there is one question which is most trending in Mutual Fund space, it is SHOULD I CONTINUE WITH HDFC EQUITY FUND?

While there is no right or wrong answers simply because it depends on a number of factors like your Risk Profile, Your other investments, et al.
This article is not written to convince you to continue to hold or sell or invest afresh  (that will be done better by your Financial Advisor), I am trying to show you some data points which are very very useful and could help you in your Investment decisions.

The Fund's performance for the past 4-6 quarters has been pretty insipid and has been panned by many investors. True.
But, its long term performance continues to inspire.
And, its underperformance for some quarters is not new at all. It has this habit of underperformance for quite a while and then bouncing back in style. It has done for so many times in the past.
And, yet, we in the MF field say "Past Performance may not be repeated"!!!!
What is most astonishing some self proclaimed "experts" comparing HDFC Equity Fund's performance with FD and RD!!
Come on! You can’t compare Oranges with Apples.
If you do compare HDFC Equity with Fd and Rd...Then do not compare for 3 or 5 years, but compare for 15 years or 20 years and show me the result!!

Courtesy : Morningstar


As I analysed HDFC Equity fund's performance history....the following amazing points I noticed :

1. The Fund which was launched in January 1, 1995 at Rs.10
Was quoting its NAV as follows:

Year 1 (Jan1, 1996) - Rs.7.29
Year 2 (Jan1, 1997) - Rs.5.67
Year 3 (Jan1, 1998) - Rs.6.79
Year 4 (Jan1, 1999) - Rs.9.29

and the Fund crossed the physiological mark of Rs.10 NAV only on 19th Jan 1999, a full 4 years after its launch!!!!

And, surprise on Year 5 (Jan1, 2000) the Fund's NAV was Rs.24.91.....MORE THAN DOUBLE!!

2. Even for a SIP investor, the value of his investment would have been like this....

Till March 1998, (that is 39 sips)
Invested Amount = Rs.39, 000
Investment Value = Rs.38400/-

So, even the proponents of SIP would have got the stick

The Interesting part is, if the Investor had continued for just 1 more year
Then his
Invested Amount = Rs.51, 000
Investment Value = Rs.86, 451...


Not only he would have gained profit, it would have been a good decent appreciation.
Now, if the investor had continued for one more year

Invested Amount = Rs.63, 000
Investment Value = Rs.1, 95,000

What many would have done is...they would have started in this fund as "Long Term", bought it in the Year 2 and SOLD (!) in year 4, after all your NAV went up from 5.67 to 9.29.
Even After 4 Years NAV Is 8.22,  then, yes, one definitely needs to rethink.
But You would have also noted that the NAV Has Increased From 6.68 to 8.22. It Shows Some Positive Changes In Fund.

Second, Third & Fourth, Year Fund Is Performing.

By the way, for your information, the NAV of HDFC EQUITY FUND  is today Rs.443 and the CAGR for those who have stayed invested since the NFO is 19.78% TAX FREE!!

I am NOT (repeat, not) advocating that you should start investing in HDFC Equity or continue to stay invested... (for that, your Advisor would be in a better position).
What I am trying to say is...if you have started in a fund with a Long Term view, then please do stay invested.
The reward for just staying put is huge.

Caveat: The Fund strategy should be good and so should be the Fund Manager. (This, of course, your Financial Advisor would be able to guide).
Panning a fund for its non-performance (even for a short term) has been a fashion.
Should always compare a fund not only with the Benchmark but also its peers.
A Fund's space in your portfolio Depends on many factors like
Bench mark returns, investment objective , underlining assets where the fund has invested in , fund house, fund manager etc etc .
There are various schemes which have gone through rough patch in the initial few years. The reasons could be multiple. At the same time some schemes have fantastic start and track record and have not been doing well in the recent past.

It is important to for an investor and distributor to stay invested with conviction. Rankings are temporary.

Srikanth Matrubai
SriKavi Wealth Advisors

No comments:

Post a Comment

Have you read the best seller DON'T RETIRE RICH ?

The MOST Loved book on How NOT TO RETIRE RICH! 4.8 out of 5 stars Order your copy NOW !