HDFC MF’s NFO to help investors with asset allocation

Investors moving money from fixed deposits to equity mutual funds looking for a simple product that takes care of their asset allocation can consider the new fund offer (NFO) of HDFC Asset Allocator Fund of Funds.Financial planners say existing mutual fund investors who have a personalised portfolio that allocates assets based on their long-term goals and risk profile should avoid such new fund offers.HDFC Asset Allocation Fund of Funds will invest 40-80% in equity, 10-50% in fixed income and 10-30% in gold. The scheme will be taxed like a debt fund and investors can start with ₹5,000 and can make additional purchases in multiples of ₹1,000. The NFO is currently open and closes on April 30.The fund manager will use fundamental parameters like trailing twelve months (TTM) PE, forward PE (price to earnings), PB (price to book), earnings yield to G Sec yield to decide the equity allocation which will be between 40-80%. Within equities, the fund manager will make a base allocation of 75-100% to large-, mid-, small- and flexicap categories of schemes with a balance of 0-25% tactical allocation to other categories of schemes.After the equity allocation is done, the fund manager will allocate 10-30% to gold depending on the real interest rates.The remainder will be invested in fixed income schemes with no duration and credit risk. The scheme will consider most of its own diversified equity funds as its core allocation (80-100%).Financial planners say a big advantage of such a scheme is the fund manager takes a call to move across asset class and there is no tax implication for investors. “It is best for a first-time investor, who is making an entry into equity mutual funds typically from fixed deposits as he gets everything in one scheme,” said Nirav Karkera, head of research at Fisdom.Financial planners also say this may not work for investors who have their asset allocation in place and have a mutual fund portfolio.“An asset allocation fund is a readymade solution which is a non-customised solution and will not work for sophisticated investors with an existing portfolio,” said Viral Bhatt, founder, Money Mantra. 82186417

from Economic Times https://ift.tt/3eBWjgv