Since their launch in the year 2000, HDFC mutual funds have steadily charted an upward growth trajectory. This has primarily been possible due to the consistency of their performance. With a minimum initial investment, these funds have equipped investors to define their financial objectives, limit their risk profiles and yet reap guaranteed short-term and long-term returns.
It thus comes as no surprise that the HDFC mutual fund business has attracted a wide variety of financial interest. Most investors are finding these fund investments to be highly profitable. This is essentially because HDFC mutual funds provide benefits like:
- Most mutual fund products/schemes/plans sponsored by HDFC have a CRISIL rating of 3 and above.
- An extensive range of financial products are offered which help investors cater to their specific needs and requirements.
- HDFC’s mutual fund portfolio is administered by an asset management company which employs professional & competent fund managers.
- The HDFC equity-linked saving scheme (ELSS) funds come laden with multiple tax benefits under Section 80(c) of the Income Tax Act, 1961.
- An option to choose between open-ended & close-ended funds is provided. Investors can also select a direct or a regular plan.
- The annualized returns for HDFC funds are quite substantial as compared to their other counterparts.
However, despite the obvious advantages associated with HDFC mutual funds, investing all your money in them, might not be a good idea.
Why You Should Not Invest All Your Money In One Fund
Although, placing your bets on funds like HDFC capital builder fund or HDFC tax saver fund, which are structured differently, sounds extremely appealing, it may not prove to be profitable in the long run.
The reasons for this are:
- Diversification is the basic principle upon which the success or failure of a mutual fund investment is hinged. If the funds of one fund house do not perform well, this loss is likely to be compensated by the funds from another fund house. Thereby, diversifying your assets across both, sectors and fund houses would be a wise strategy.
- Spreading out your investments in more than one fund house can help avoid concentration risk. Though the HDFC fund management is varied and strong, their market viewpoints are often similar. This is because their analysis is backed by the data provided by the same research teams. Ultimately, this ends up getting reflected in the performance of all major funds which are simultaneously affected in case something goes wrong.
- The scale of your investment is an important determiner of where your funds should be. For instance, if you are sparing a small amount like 2,000 INR every month, it would be better to invest in one fund of a single house. Nonetheless, if you are investing a high amount of 2,00,000 INR per month, it would be better to avail the services of multiple fund houses.
By picking more than one fund house, you don’t just protect yourself from uncertainty, but also ensure that your profits are hedged against market upheavals. However, if you have already invested in a single fund house, wait for at least a year before you withdraw your capital or else you might have to bear the brunt of a heavy exit load and an exorbitant short-term capital gains tax.
The Way Forward
If you are still wondering whether you should invest all your money in HDFC mutual funds or spread your capital across different fund houses, online platforms like OroWealth can render efficient assistance. With their predictive technology, they can help you craft a credible investment profile and thus select funds which suit your precise requirements. You can click here to know more about the offerings and returns from OroWealth.
While investing in HDFC mutual funds can help you reap numerous gains, placing all your bets on a single fund house is never advisable. Therefore, make sure you tread this rough financial terrain with adequate prudence, due diligence and great caution.