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Balanced Approach

Comparisons should not blind you about what good returns are

I had invested in HDFC Prudence Fund Growth and FT India Balanced Fund Growth about two-and-a-half years ago. Both their returns were similar then. Now, Prudence’s return is 36 per cent while FT India’s is 24 per cent. Should I exit FT India?

You are sounding disappointed, but that is a very good rate of return - if you see it in isolation where you are getting 24 per cent return from a moderate portfolio. Both these funds are good.

One thing which you are forgetting is that when the markets fell, HDFC Prudence too tumbled heavily. If you want to minimise the risk, then the combination of both these funds is very good. HDFC Prudence has been hugely rewarding, but it is a very aggressive balanced fund. It is very close to an equity fund which invests 20 per cent in fixed income. HDFC Prudence should be looked at in this particular way. During the market fall, the behaviour of this fund was on the lines of an equity fund. The kind of fall which was seen in equity was also seen in this fund as well. If you can deal with such ups and downs then you should keep HDFC Prudence, but the time frame should be four-to-five years.

We would suggest that these funds are balanced funds and they have a steady take on growth. They do well in a good market and they fall less in a falling market, which is the general idea. Smebody as methodical as you, who has carefully chosen two balanced fund, and also has a time horizon on mind and is investing regularly, then he should consider investing in equity from five-to-ten years.

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