Post on 20-Feb-2023
Never settle for Average - Steve Jobs
Success and average don’t have anything to do with each other- Eric Thomas
All I Knew Is That I Never Wanted To Be Average - Michael Jordan
Warning: Getting inspired by these quotes can be harmful for individual investorsin the world of Equity Investing
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Traditionally, most of us have been harsh on the idea of being “average” as we keep saying “that was an average movie”, “she is just an average student”, etc.
Our argument is that, “average” is not just good enough, but is ‘the thing’ one should strive to achieve as far as equity investing by individual investors is concerned.
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Rupee Cost Averaging :Invest a particular amount in a mutual fund every month (or every day / week / quarter) through the ups and downs of the market movement of a mutual fund's NAV. With rupee cost averaging (or Systematic Investment Plan or SIP), an investor benefits by buying more units when the market is down and less units when the market is up.
An example of a 36 month* SIP done in HDFC Flexi Cap Fund throughCOVID crisis
No. of units bought in May 2021 – 12
Rupee Cost Averaging at its best
3
Monthly* Installment of `10,000
No. of units bought in Apr 2020 – 23 (*SIP Date-1st business day of every month)
SIP - Systematic Investment Plan
10
12
14
16
18
20
22
24
01-J
un-1
801
-Jul
-18
01-A
ug-1
801
-Sep
-18
01-O
ct-1
801
-Nov
-18
01-D
ec-1
801
-Jan
-19
01-F
eb-1
901
-Mar
-19
01-A
pr-1
901
-May
-19
01-J
un-1
901
-Jul
-19
01-A
ug-1
901
-Sep
-19
01-O
ct-1
901
-Nov
-19
01-D
ec-1
901
-Jan
-20
01-F
eb-2
001
-Mar
-20
01-A
pr-2
001
-May
-20
01-J
un-2
001
-Jul
-20
01-A
ug-2
001
-Sep
-20
01-O
ct-2
001
-Nov
-20
01-D
ec-2
001
-Jan
-21
01-F
eb-2
101
-Mar
-21
01-A
pr-2
101
-May
-21
200
300
400
500
600
700
800
900
Uni
ts P
urch
ased
Fund
NA
V
Fund NAV Units Purchased each month
Flattish period
COVID led fall
Recover / Rally
HDFC Flexi Cap Fund - Rupee Cost Averaging Example
Market Cycles:Markets oscillate between high (overvalued) and low (undervalued) levels from timeto time.
Buy Low and Sell High? But, this isimpossible to do on a consistent basis
WHAT TO DO?
Capture the average?This is the smarter thing to do.
How to achieve this?A Simple SIP is good enough to capture the average.
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Peak
AverageLine
Bottom
Pric
e
Time
Favourable demographics
Large availability of skilled, young, English speaking and competitive manpower
Rich in natural resources
Low penetration of consumer goods and improving affordability
Large unmet needs of infrastructure
Strong reforms momentum
Low global interest rates and ample liquidity
Shift underway in global manufacturing
Participate in India’s growth story with SIPs
Indian economy is expected to grow at a healthy rate over the next few decades
The healthy economic growth to reflect in terms of robust growth by business
The growth in business could have a positive impact on returns on equity investments
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Factors in favour of India's growth over the next few decades :
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6The above is for illustrative purposes only to explain the Concept of Averaging. HDFC AMC / HDFC Mutual Fund is not guaranteeing any returns on investments made in the scheme(s).
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NIFTY 50 Yearly Returns
Volatility in markets leads us to take emotional decisions.Hence, SIP is a disciplined way to invest in equities for individual investors.
*Volatility refers to frequent and extreme upward and downward movements in stock prices.
Greed: An investor who had invested in equitymarkets at the start of FY 2010 (when markets jumped 74%) gets caught up in greed with a desire to acquire as much wealth as possible in the shortest time.
80%
FY 19
99
FY 20
00
FY 20
01
FY 20
02
FY 20
03
FY 20
04
FY 20
05
FY 20
06
FY 20
07
FY 20
08
FY 20
09
FY 20
10
FY 20
11
FY 20
12
FY 20
13
FY 20
14
FY 20
15
FY 20
16
FY 20
17
FY 20
18
FY 20
19
FY 20
20
FY 20
21
100%
60%
40%
20%
42%
0%-3%
-25%
-2%
-13%
81%
15%
67%74%
11%
-9%
7%
18%27%
19%10%
15%
71%
-26%
-9%
12%
-36%
24%
-20%
-40%
8
Fear: Conversely, an investor who had invested a large sum of money at one go, in equitymarkets at the start of FY 2009 (when markets corrected) would always perceive equity markets as risky and would generally avoid equities.
The stock market is a device for transferring money from the impatient to the patient. - Warren Buffett
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Greed and Fear in Market Cycles Human beings are guided by 2 extreme emotions "Greed" and "Fear", which prevent them from taking sound investment decisions.
When there are excesses in the stock market, Greed sets in, which in turn results in major correction, thereby triggering the Fear psychology. Most of the investors are trapped in the greed and fear cycles by buying in greed and selling in fear, resulting in a bad investment experience.
Just made handsome gains
Approach to investing I am sure I can repeat mysuccess
Moves to increase exposureto equities beyond optimal levels
Exits equities
Yes Yes
I should never have madethese investments
Urge to act
Impact on assetallocation
Just made large losses
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No change; Maintains balance
No
I am ready for the longjourney ahead
An SIP Investor
Events that have impacted the markets :
Asian Currency Crisis
Pokhran Nuclear Test, US Sanctions
Kargil War, NDA forms Central Government
Dot Com Bubble
9/11 Terror Attacks in US
NDA loses Lok Sabha elections
Collapse of Lehman Brothers,Global Financial Crisis
Rulling UPA re-elected in India, Satyam Scam
European Sovereign Debt Crisis
USA’s Credit Rating downgraded
NDA forms Central Government
Demonetisation, Brexit
GST Rollout
Trade War, Surge in Crude Oil Price
NDA forms Central Government
COVID-19
Taper Tantrum ( Surge in US Yields), High Twindelicit in India (CAD andFiscal Deficit)
Relevance of these events for a long term SIP investor?NilLet’s look at an example..
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1997
1998
1999
2000
2001
2004
2008
2009
2010
2011
2013
2014
2016
2017
2018
2019
2020
10
Source : MFI Explorer
HDFC Flexi Cap Fund - Regular Plan Growth NAVAverage Cost per Unit at year end ( )
11
31-M
ar-9
5
29-M
ar-9
6
31-M
ar-9
7
31-M
ar-9
8
31-M
ar-9
9
31-M
ar-0
0
30-M
ar-0
1
28-M
ar-0
2
28-M
ar-0
2
31-M
ar-0
3
31-M
ar-0
4
31-M
ar-0
5
31-M
ar-0
6
30-M
ar-0
7
30-M
ar-0
8
30-M
ar-0
9
30-M
ar-1
0
30-M
ar-1
1
30-M
ar-1
2
28-M
ar-1
3
31-M
ar-1
4
31-M
ar-1
5
31-M
ar-1
6
31-M
ar-1
7
28-M
ar-1
8
29-M
ar-1
9
31-M
ar-2
0
31-M
ar-2
1
31-M
ay-2
1
400
500
300
600
700
800
900
200
100
0
Can you guess what is average cost of the units accumulated via SIP?Answer - ` 29.02
29.02
875.882
The reason for lower average cost is the disciplined approach to investing where moreunits were accumulated at lower NAV during the early stage of the SIP period.
Long term SIP in HDFC Flexi Cap FundA Truly Rewarding Journey
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We can broadly divide two types of people who needSIP for investing
Ones who understandmarkets and basics of investing
Ones who do notunderstand marketsand basics of investing
SIP is a basic need of every individual. Food, Clothing, Shelter and SIP
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Over 5 Years
84% of investors
73% of investors
Over 10 Years
Source: InternalBased on tenure at the time of registration of all live SIPs during Mar - 21
HDFC MF SIP - Tenure chosen by investors
Most of our SIP investors think long term
No doubt laziness and forgetfulness are negative human traits,but can prove useful in stock markets for individual investor for“staying invested” for a long time.
Risk in equities reduces with long term approach
No need to lose sleep over market movements
No need to track your investments every now and then
No urge to keep ‘doing something’
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Advantages in the “invest and forget” approach:
Do something today that your future self will thank you for- Sean Patrick Flanery
You have to act and act now - Larry Ellison
Success is not easy and it is certainly not for the lazy - Anonymous
Warning: Getting inspired by these quotes can be harmful for individual investorsin the world of Equity Investing
1214
Ensure assetallocation
Start Early Stay invested
InvestRegularly
Let’s look at them in detail!
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1315
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The below illustration is to showcase how you need to invest larger sums as you delay your retirement saving and how much it costs you in the long run. The % change is reflected over the previous start age. The calculations are done assuming a rate of return of 12% p.a. CAGR.
Start @ 35 Yrs
…A delay in 10 years cuts your retirement corpus by more than 50% at every step even though you may invest the same amount over time.
Source: Internal CalculationCalculations are based on assumed rates of return compounded monthly (XIRR), and actual returns on your investment may be more, or less. This illustration is not intended to be indicative of the performance of any specific investment and does not represent a guarantee of returns in this Scheme. The above is only a tool that may help you to know benefit of early investment to reach your goal of retirement saving but it should not be construed as providing any kind of investment advice or as a substitute for any kind of financial planning.
Investment Amount Per Month 5,000 7,000 11,667
21,00,000
1,31,51,926 58,28,436
21,00,000 21,00,000
3,21,54,797
NA 59.10% 55.68%
Amount Invested
Start @ 25 Yrs Start @ 35 Yrs Start @ 45 Yrs
Value of Retirement Corpus @ 60 Years of age
Delay by 10 years would reduce your corpus by
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SIP helps to stay disciplined in your investment journey
Fight Back Your Temptations to Overspend with SIP!
Do not save what is left after spending, but spend what is leftafter saving - Warren Buffet
A small sacrifice
Amount Saved per year (in `)
Assumed Rate of Return (%)
Accumulated amount at the end of 35 years (in `)
Skip 1 cigarette per day i.e., 365 cigarettes in a year
Cost of 1 cigarette - `15
5,475
12%
26 Lakhs 50 Lakhs 87 Lakhs
12% 12%
10,400 18,000
Cost of 1 pint - `200
Skip 1 beer over weekend i.e., 52 beers over a year
Spend less on movies / dinner
Spend `1500 less on movies / dinner every month
Cost
Invest the amount saved annually for next 35 years
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To benefit from SIP, one should invest on periodic basis and not allowemotions to drive their investment decisions.
Below table shows example of two individuals, Mr. A and Mr. B, both started their SIP journey in HDFC Flexi Cap Fund on 1st April 2018. During the beginning of COVID 19, Mr A paused his SIP for 6 months (driven by fear of COVID 19 impact on markets) while Mr. B continued with his disciplined approach of investing regularly. Here are the results:
The trick is not to learn to trust your gut feelings, but rather todiscipline yourself to ignore them... - Peter Lynch
A B
SIP Start Date 1st April 2018 1st April 2018
Yes No
NA6 months
3,20,000 3,80,000
4,29,597 5,29,721
1,00,124
SIP Pause
Pause Period
Difference
Amount Invested
Market Value as on31st May 2021
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Channelize your SIP into three different asset classes
These are some of the funds o�ered by HDFC Mutual Fund.These are not recommendations, investors should consider their risk pro�le or consult their advisors before investing.
SIP
Equity
HDFC Top 100 Fund
HDFC Flexi Cap Fund HDFC Corporate Bond Fund
HDFC Low Duration Fund
HDFC Medium Term Debt FundHDFC Mid-CapOpportunities Fund
HDFC Small Cap Fund
Debt Gold
HDFC Gold Fund
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Source: Internal CalculationThe above table is for illustration purpose only, purely to explain how much of monthly investment is required to reach a corpus of R1 crore at the time of retirement and should not be construed as providing any kind of investment advice or as a substitute for any kind of financial planning. ◆HDFC Mutual Fund/HDFC AMC is not guaranteeing any returns on investments made in the Scheme. Calculations are based on assumptions provided above. ◆All figures are indicative in nature and do not represent assured returns in any way.
What to do?How much do I need toinvest every month?
How to Do?The amount you need to invest is aresult of the rate of return and time.
Illustration: Monthly Investment Amount toreach a target corpus of 1 Crore at age of 60
Key Takeaways
Start Early
Invest Regularly
Stay Invested
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Age
Age 30 Age 40 Age 50 Retired atAge 60
25
8% 10% 12% 15%
35
45
21
Retirement PlanningThe earlier you start, the easieryou save money for retirement
RetirementCorpus
₹Rate of Return (Compounded Monthly)
How much is enough?
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Cost ofeducation
Cost of Education is risingmuch faster than inflation
Inflation
With rising education costs across all professional degrees,saving for education becomes even more imperative
Child care costs also include additional costs of housing,transportation, clothing, food, health care, etc.
Long term equity investing is a suitable medium tocombat ever increasing costs
The above chart is only an illustrative example to show rising cost of education and not based on actual data.
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A SIP of `10,000 per month in HDFC Flexi cap Fund since Inception (January 01, 1995) would have grown to `9.57 Cr as on 31st May 2021
HDFC Flexi Cap Fund (History of SIP)
23
SIP perMonth
` 10,000
TotalInvestment
` 31.70 Lakh
Market Value as on31st May 2021
` 9.57 Cr
CAGR
20.92%
Investment wouldhave grown
30 times
TimeTaken
26 years
0
INR
Lak
hs
200
400
600
800
900
1000
100
300
500
700
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Cumulative Amount Invested at year end
Market Value in Benchmark at year end (NSE 500)
Market Value in HDFC Flexi cap at year end
`9.57 cr
`3.42 Cr
`31.70 Lakh
24
CAGR returns are computed after accounting for the cash flow by using XIRR method (investment internal rate of return). The above investment simulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. SIP - Systematic Investment Plan.Since Inception Date = Date of First allotment in the Scheme / Plan.
SIP since inception* of `10,000 invested systematically on the first business day of every month(total investment `31.70 lakh) in HDFC Flexi Cap Fund would have grown to ~`9.57 crore on May 31, 2021 (refer below table).
SIP Investments 1 year SIP3 year SIP5 year SIP10 year SIP15 year SIPSince
Inception*
Total Amount Invested (` in 000)
120.00
163.96
74.60
60.60
53.55
Market Value as on May 31, 2021 (` in 000) Returns (%)
Benchmark Returns (%)#
Additional Benchmark Returns (%)##
3,170.00
95,713.74
20.92
15.06
13.98
1,800.00
5,621.88
13.93
13.12
12.70
1,200.00
2,524.80
14.24
14.96
14.30
600.00
884.95
15.55
17.16
17.14
360.00
502.73
22.96
24.18
22.52
SIP Performance - HDFC Flexi Cap Fund - Regular plan - Growth Option
CAGR returns are computed after accounting for the cash flow by using XIRR method (investment internal rate of return). The above investment simulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. SIP - Systematic Investment Plan. Since Inception Date = Date of First allotment in the Scheme / Plan. $$ All Dividends declared prior to the splitting of the Scheme into IDCW & Growth Options are assumed to be reinvested in the units of the Scheme at the then prevailing NAV (ex-dividend NAV).
SIP since inception of `10,000 invested systematically on the first business day of every month (totalinvestment ~`29.60 lakh) in HDFC Top 100 Fund would have grown to `4.87 crore$$ on May 31, 2021(refer below table).
SIP Investments 1 year SIP3 year SIP5 year SIP10 year SIP15 year SIPSince
Inception*
Total Amount Invested (` in 000)
120.00
155.53
59.39
54.09
49.02
Market Value as on May 31, 2021 (` in 000)$$ Returns (%)$$
Benchmark Returns (%)#
Additional Benchmark Returns (%)##
2,960.00
48,659.04
18.82
N.A.
14.73
1,800.00
5,165.11
12.95
13.10
12.83
1,200.00
2,369.43
13.05
14.58
14.49
600.00
847.62
13.80
16.78
17.43
360.00
478.41
19.39
22.42
21.84
SIP Performance - HDFC Top 100 Fund - Regular plan - Growth Option
(Please turn overleaf)
Value of `10,000 invested
NAV as on May 31, 2021 ̀ 875.882 (per unit)
Scheme
Period Returns (%)Benchmark Returns (%) # Benchmark
Returns (%) ## Scheme (`)
Benchmark(`)# Benchmark
(`)##
Last 1 year
16,44315,05320,355
177,537
Last 3 years Last 5 yearsSince Inception*
*Inception Date: January 01, 1995. The Scheme is managed by Mr. Prashant Jain since June 20, 2003. # NIFTY 500 (Total Returns Index) ## NIFTY 50 (Total Returns Index). As NIFTY 50 TRI data is not available since inception of the scheme, additional benchmark performance is calculated using composite CAGR of NIFTY 50 PRI values from January 1, 1995 to June 29, 1999 and TRI values since June 30, 1999. Since Inception Date = Date of First allotment in the Scheme / Plan.
74.7912.6614.3718.44
70.2613.6715.5912.03
63.9814.5915.2711.50
17,53314,30419,572
875,882
17,07614,69320,639
201,381
HDFC Flexi Cap Fund - Performance - Regular plan - Growth Option
25
Performance of Other Funds Managed By Prashant Jain, Fund Manager of HDFC Flexi CapFund (Erstwhile HDFC Equity Fund) & HDFC Top 100 Fund (who manages total 4 schemes)
Performance of Permitted Category FPI Portfolio(s) managed bythe Fund Manager (Mr. Prashant Jain)
On account of difference in type of scheme, asset allocation, investment strategy, inception dates, the performance of these schemes is strictly not comparable. +The Fund is co-managed by Mr. Prashant Jain (Equities) & Mr. Shobhit Mehrotra ( Debt).
Past performance may or may not be sustained in the future. Returns greater than 1 year period are compounded annualised (CAGR). The above returns are computed using the Time Weighted Rate of Return (TWRR) methodology, to make them more comparable with the mutual fund scheme’s returns. FPI Portfolio: Inception date is 22nd March, 2016. The performance is not comparable with the performance of the aforementioned scheme(s) of HDFC Mutual Fund due to differing investment objective/s and fundamental differences in asset allocation, investment strategy and the regulatory environment. The said disclosure is pursuant to SEBI Circular no. Cir/IMD/DF/7/2012 dated 28th February, 2012 pertaining to Regulation 24(b) of SEBI (Mutual Funds) Regulations, 1996. N.A. Not Applicable. FPI - Foreign Portfolio Investor.
Notes common to all tables:Past performance may or may not be sustained in the future. Returns greater than 1 year period are compounded annualised (CAGR). Load is not taken into consideration for computation of above performance(s). Different plans viz. Regular Plan and Direct Plan have different expense structures. The expenses of the Direct Plan under the scheme will be lower to the extent of the distribution expenses/commission charged in the Regular Plan. Returns as on May 31, 2021. The above returns are of Regular Plan- Growth Option. N.A.: Not Available
Scheme
Managingscheme
since Returns (%) as on May 31, 2021
Returns (%) as on May 31, 2021
Last 1 year (%) Last 3 year (%) Last 5 year (%)
Last 1 year (%) Last 3 years (%) Last 5 years (%)
20-Jun-2003 57.80
70.98
ManagingPortfolio
Since
22-Mar-16 15.11 14.71
61.94 14.67 14.15
11.34 12.81HDFC Balanced Advantage Fund
41.79 13.83 13.43Benchmark - NIFTY 50 Hybrid Composite Debt 65:35 Index
Permitted Category FPI Portfolio(managed under a bilateral agreementunder Regulation 24(b) and subject toapplicable laws)
Benchmark - MSCI India (Total Returns)
26-Dec-2003 25.11 9.17 8.86HDFC Hybrid Debt Fund +
14.35 11.21 9.80Benchmark - NIFTY 50 Hybrid Composite Debt 15:85 Index
Value of `10,000 invested
NAV as on May 31, 2021 ̀ 618.894 (per unit)
Scheme
Period Returns (%)$$Benchmark Returns (%) # Benchmark
Returns (%) ## Scheme (`)
Benchmark(`)#
Benchmark (`)##
Last 1 year
16,20915,23020,721
243,566
Last 3 years Last 5 yearsSince Inception*
*Inception Date: October 11, 1996. The Scheme is managed by Mr. Prashant Jain since June 20, 2003. # NIFTY 100 (Total Returns Index) ## S&P BSE SENSEX (Total Returns Index). $$ All Dividends declared prior to the splitting of the Scheme into IDCW & Growth Options are assumed to be reinvested in the units of the Scheme at the then prevailing NAV (ex-dividend NAV). Since Inception Date = Date of First allotment in the Scheme / Plan.
63.3911.5013.2819.17
63.1213.9415.32N.A.
61.6615.0415.6813.83
16,38313,86618,659
754,622
16,35614,79620,401
N.A.
HDFC Top 100 Fund - Performance - Regular plan - Growth Option
26
PRODUCT LABELING:
HDFC Flexi Cap Fund(Erstwhile HDFC Equity Fund)
HDFC Top 100 Fund
An open ended equity schemepredominantly investing in largecap stocks
HDFC Mid CapOpportunities FundAn open ended equity schemepredominantly investing in midcap stocks
• To generate long-term capital appreciation / income• Investment predominantly in Large-Cap companies
An open ended dynamic equityscheme investing across large cap,mid cap, small cap stocks
• To generate long-term capital appreciation / income• Investment predominantly in equity & equity related instruments
• To generate long-term capital appreciation / income• Investment predominantly in Mid-Cap companies
• To generate long-term capital appreciation / income• Investment predominantly in Small-Cap companies
HDFC Corporate BondFundAn open ended debt schemepredominantly investing in AA+and above rated corporate bonds
HDFC Small Cap FundAn open ended equity schemepredominantly investing insmall cap stocks
HDFC Low DurationFundAn open ended low duration debtscheme investing in instrumentssuch that the Macaulay Durationof the portfolio is between 6months and 12 months
HDFC Medium TermDebt FundAn open ended medium term debtscheme investing in instrumentssuch that the Macaulay Durationof the portfolio is between 3 yearsand 4 years
• Income over short to medium term• To generate income/capital appreciation through investments predominantly in AA+ and above rated corporate bonds
• Income over short term• To generate income / capital appreciation through investment in debt securities and money market instruments
• Income over medium term• To generate income / capital appreciation through investments in Debt and Money Market Instruments
RISKOMETERNAME OF SCHEME THIS PRODUCT IS SUITABLE FOR INVESTORS WHO ARE SEEKING*
HDFC Gold FundAn open ended Fund of Fund schemeinvesting in HDFC Gold ExchangeTraded Fund
• Capital appreciation over long term• Investment in Units of HDFC Gold Exchange Traded Fund (HGETF). HGETF invests in gold bullion of 0.995 fineness
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
Release Date: 05 July, 2021
Investors should consult their financial advisers, if in doubt about whether the product is suitable for them.*For latest Riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund viz. www.hdfcfund.com