Mutual funds are designed for both stable and high returns but not everyone can have a clear understanding of their risk-return preference. For such individuals, hybrid funds work the best to achieve required goals. Also known as a balanced fund, a hybrid mutual fund invests in both equity and debt-based instruments. One such fund is HDFC Hybrid Equity Fund that offers both these benefits.Read more
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In this piece, we will cover all aspects of the HDFC Hybrid Equity fund and analyze its potential growth and risks.
A hybrid equity fund is a balanced fund that leans towards equity investments and usually has more than 65% of the fund allocation towards equity-based instruments.
HDFC Hybrid Equity Fund is an open-ended hybrid equity fund that was launched in September 2000. Over the past 21 years, the fund has raised an AUM (Assets Under Management) of more than Rs 18,908 crores.
Within its category, it is a sizable amount that grows investors’ confidence. If you are a new investor considering this fund for a lump-sum investment or SIP, a significant AUM can be a promising indicator.
The core investment objective of HDFC Hybrid Equity Fund is to generate income and capital appreciation by building a portfolio of equity and equity-related instruments. The scheme also invests in debt and money market instruments to maintain a strong foundation and earn stability. However, the percentage of debt allocations remains significantly lower than allocations towards equity.
The underlying investment objective guides the fund allocation and asset management strategy for HDFC Hybrid Equity Fund. Between 65%-80% of the portfolio is invested in equity-related instruments that include large, medium, and small-cap companies.
These companies are selected for investment if they have:
The remaining 35%-20% of the fund is allocated to debt securities that are selected based on the following parameters:
A higher equity allocation is why this fund can generate good returns, but it also increases the risk involved for investors. During bull market or corrections, this fund is likely to behave in a volatile manner. As an investor, you must be prepared to face such movements before going all in.
HDFC Hybrid Equity Fund has two plans for investors to choose from. These are:
Under these two plans, an investor can opt for either the Growth option or the IDCW option.
Since the gains are not reinvested in the scheme, the NAV of the IDCW plan is lower than the HDFC Hybrid Equity Fund Growth plan. If your objective behind investing in this equity fund is to generate regular dividend income, then the IDCW plan is better suited for you.
To invest in HDFC Hybrid Equity Fund, you can choose either the lump-sum investment option or set up a Systematic Investment Plan (SIP) for daily, weekly, monthly, or quarterly contributions. For the initial lump sum investment, the minimum purchase amount is Rs 5000. Subsequent investments can be made in multiples of Rs 1000.
For the SIP option, depending upon the frequency of the SIP, the minimum amount can vary. It can be categorized as:
Investors have to undergo a KYC process before their fund application gets accepted. Based on their preferred plan and option, fund units are allocated after the completion of KYC. While there is no upper limit of investment, for cash transactions in the lump-sum purchase, an upper limit of Rs 50,000 is applicable.
Furthermore, a transaction charge of Rs 150 is applicable for first-time investors for transactions above Rs 10,000. For repeat users, this transaction charge is Rs 100 and incurs a one-time fee per scheme.
Following is the eligibility criteria for investment in the HDFC Hybrid Mutual Fund:
The risk-return profile of the HDFC Hybrid Equity Fund is ‘Very High.’ It means that investors with a considerably high-risk appetite seeking higher returns over a long investment horizon can find it as a deserved inclusion in their investment portfolio.
To further support your investment decision, here are some critical facts about HDFC Hybrid Equity Fund that you must know.
The AMC levies no entry load when you start investing in the HDFC Hybrid Equity Fund. However, at the time of exiting the fund, each transaction may attract some exit load. Up to a limit of 15% of the Units owned by an individual investor can be redeemed without any exit load from the date of allotment.
Beyond this limit, an exit load of 1.00% is applicable if the Units being redeemed or switched out are within one year from the date of allotment. After one year from the date of allotment, no exit load is payable on all Units.
Since this is an open-ended fund, there is no lock-in period applicable. Investors can enter and liquidate or redeem their Units at any given time.
Any bonus units allocated or dividend reinvestment applicable in the HDFC Hybrid Equity Fund Growth plan is also exempt from any exit load at the time of redemption. It is irrespective of the date of allotment of Units.
The Total Expense Ratio is the cost levied by the AMC for managing the fund. It is calculated based on total Assets Under Management (AUM) and is expressed per unit. This is the cost that individual investors have to bear upon each transaction and can reduce their invested amount.
The TER for the Regular plan of HDFC Hybrid Equity Fund is 1.77% (as of 30th September 2021) and for the Direct plan is 1.13%. There is no difference in TER calculation for Growth and IDCW options.
The HDFC Hybrid Equity Fund is benchmarked against the Nifty 50 Hybrid Composite Debt 65:35 Index. Due to a higher risk-return profile, the fund is suggested for an investment horizon of 3 years or longer.
There are 49 such funds within its category, amongst which HDFC Hybrid Equity Fund holds a rank of 21 (as of 30th September 2021). It has a three-star rating, which indicates average performance within the category.
The returns of HDFC Hybrid Mutual Fund have been consistent. The fund promises five-year returns of nearly 12.89% and has given investors a net return of 15.98% since its launch.
HDFC Hybrid Equity Fund is an aggressive investment scheme with the potential of delivering high returns through predominantly equity-linked investments. If the fund’s composition and allocation logic meet your investment objective, you can consider adding it to your portfolio. However, before investing in this scheme, it is wise to consult a financial advisor and determine what outcomes you want to achieve.
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*Tax benefit is subject to changes in tax laws. Standard T&C Apply
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