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Can I hold on to HDFC Balanced Advantage Fund?

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Last Updated: May 27, 2020, 04.01 PM IST
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Summary If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

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I am retired and looking for a safe monthly dividend paying mutual fund. Currently, I am invested in HDFC Balanced Advantage Fund (D). Can u confirm if I can hold on to this fund for the next 7-10 years. Can u also recommend a divided pay out MF?
-Raj Shahani


Mutual funds do not guarantee returns or dividends. As per Sebi norms, mutual funds can declare dividends only from their realised profits. This means mutual funds would not be able to declare dividends when the markets - bond or equity - are going through a bad phase. So, it is not advisable to bank on dividends to draw a regular income.

It is better to set up a Systematic Withdrawal Plan or SWP in a mutual fund scheme to draw a regular income from your investments. If you do not want to touch your capital, you should withdraw less than what you would make in the scheme. For example, if you think the scheme is going to offer you 8% annual returns, you should withdraw less than 8% to preserve your capital. If you do not mind dipping into the capital, you can withdraw according to your needs.

HDFC Balanced Advantage Fund is a dynamically managed scheme. These schemes manages the equity portion based on the market conditions and certain key parameters. Ideally, they will invest less in equity when the market is overvalued, and more when the market is cheap. However, you should keep in mind that they can have a very high equity investment. For example, HDFC Balanced Advantage Fund currently has an equity exposure of around 82%. Hope you are okay with the equity exposure.

You should keep track of your investments in open-ended equity mutual funds. If you find them lagging their benchmark and category for a year or two, you should try to find out the reason behind the underperformance. If you don't find the reason compelling enough, you may consider selling your investments and transfer the money to a better performing scheme.
(If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)
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