Should I exit HDFC Balanced Advantage Fund?

–subramaniam

Balanced Advantage Funds are hybrid funds that invest in both equity and debt. The allocation in equity and debt is not fixed and varies depending on the market outlook and views of the fund management team. Balanced advantage funds are good for conservative investors who want to generate higher returns than debt with limited risk.

However, HDFC Balanced Advantage Fund is managed more aggressively than its peers and does not use derivatives to reduce equity exposure to less than 65% of the corpus. The fund currently holds around 70% in equity while the peers had lower equity allocation. From a return perspective, at current market levels, this fund would have generated higher returns than its peers in the Balanced Profit category due to the higher equity allocation, but it also adds more volatility. You cannot compare Balanced Advantage Hybrid Funds with Equity Diversified Funds as the fund will have a fair allocation of debt at all times. The fund has given a return of around 18% per annum in the last three years which is reasonable considering the market conditions and a balanced fund during this period. If your investment horizon remains long-term even after keeping the horizon of three years and at the same time you are willing to take limited risk then you can continue your investment in HDFC Balanced Advantage Fund. If you want to take some extra risk and invest more time then you can switch to Equity Diversified Fund where your money will be invested only in Equity.

– Reply to Harshad Chetanwala, founder of MyWealthGrowth.com

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