DSP Equity & Bond: For steady returns over the long term

The hybrid fund has delivered a healthy 14.6% annually for nearly 20 years

Investors wanting to mitigate market volatility risk, owing to Lok Sabha elections and macro uncertainties, can consider safer hybrid funds. DSP Equity & Bond is a balanced fund with a steady long-term track record. Since its launch nearly 20 years ago, the scheme has delivered a healthy 14.6 per cent annually.

DSP Equity & Debt takes a fairly conservative approach to its portfolio construction. The equity portion mostly comprises large-cap stocks, while the debt part is made up of instruments with the highest credit ratings.

Over three- and five-year time-frames, the scheme has done better than the category average. The extent of outperformance has been to the tune of 50-150 basis points.

In the last five years, DSP Equity & Debt has delivered annual returns of 14.9 per cent, placing it among the top quartile of funds in the hybrid category. Over this period, it has delivered better returns than peers such as L&T Hybrid Equity and Reliance Equity Hybrid. Investing in the direct plan of the scheme will reduce costs and boost returns over the long term.

DSP Equity & Bond will be suitable for investors with a modest risk appetite and an investment horizon of about five years. Investing through the SIP route is advisable to average costs and ride out market volatility.

Portfolio strategy

The fund invests 70-75 per cent of its portfolio in equity, and the rest in debt. The exposure to individual stocks is diffused in the case of equity investments, with most companies, barring three, accounting for less than 3 per cent of the portfolio. Thus, the portfolio is fairly diffused.

HDFC Bank, Bajaj Finance, Axis Bank, TCS, Infosys and TCS are some of the key equity holdings in the portfolio. While banks and financial service companies dominate the portfolio, the scheme has churned other sector holdings, too, with software, pharma and consumer non-durables finding favour. Segments such as construction projects have seen exposures reduced.

DSP Equity & Bond takes a safe approach to its debt portfolio. Debentures, bonds and NCDs of financial institutions such as HDFC Bank, SBI, NABARD and Bank of Baroda are among the fund’s top holdings in its debt portfolio, apart from government securities.

Generally, most securities are rated AAA. In a few cases, where the fund gets into instruments rated AA, it is usually in stable names with a good standing such as Axis Bank, Tata Motors and Shriram Transport. It has a small exposure of around 0.57 per cent to DHFL.

Overall, the debt and equity portfolios of the fund contain quality names with only moderate levels of risks taken.

Invest in the scheme for steady, rather than spectacular, returns over the long term.

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