Understanding the Key Differences Between HDFC FMP and Axis Bluechip Fund
When it comes to investing in the financial markets, it is crucial to understand the differences between various types of investment options. Among these, the HDFC FMP and the Axis Bluechip Fund are two options that investors frequently consider. This article delves into the key distinctions between these two investment products, helping you make an informed decision based on your financial goals and risk tolerance.
Introduction to HDFC FMP
The HDFC Fixed Maturity Plan (FMP) is a fixed-term investment option offered by HDFC Mutual Fund. It is a close-ended scheme that is typically open for purchases during the New Fund Offering (NFO) period. The main objective of an FMP is to invest the aggregated corpus of investors in debt securities, bonds, or other fixed-income instruments for a fixed maturity period. During this period, the investors cannot withdraw their investments until the FMP matures, providing the fund manager with a clear investment horizon to achieve maximum returns.
Understanding the Axis Bluechip Fund
In contrast, the Axis Bluechip Fund is an open-ended equity scheme that invests in large-cap stocks or blue-chip scrips. Being an open-ended fund, it is open for purchases during the NFO period and also for additional purchases, systematic investment plans (SIP), systematic transfer plans (STP), and even switch and redemption options even after the scheme opens for public investment. The main objective of an Axis Bluechip Fund is to maximize capital appreciation by investing in a diversified portfolio of top-performing, well-established companies.
Key Differences Between HDFC FMP and Axis Bluechip Fund
1. **Investment Nature and Risk Profile**: One of the primary differences lies in the investment nature and risk profile of the two funds. HDFC FMPs focus on debt or fixed-income instruments, which generally offer lower risks and stable returns. On the other hand, Axis Bluechip Fund is an equity-based fund, which means it carries higher risk due to the volatility of the stock market. However, the potential returns from an equity fund can also be significantly higher if the chosen stocks perform well.
2. **Exit Policy**: Investors in HDFC FMPs can liquidate their investments once the FMP reaches its maturity date. This provides a clear exit strategy for investors looking to lock in their returns. Conversely, investors in Axis Bluechip Fund have the advantage of flexibility. They can exit the investment on any business or trading day, allowing them to manage their portfolios based on market conditions or personal financial needs.
3. **Investment Options and Liquidity**: HDFC FMPs do not offer options like SIPs and STPs, whereas Axis Bluechip Fund investors can easily set up SIPs and STPs to manage their investments systematically. SIPs allow investors to invest a fixed amount at regular intervals, spreading the cost of entry and potentially averaging out the cost of investing in the market. STPs enable investors to transfer funds from one scheme to another at regular intervals, offering more strategic control over their investments.
4. **AUM and Investment Strategy**: Another critical difference is the Asset Under Management (AUM). In an HDFC FMP, a significant portion of the AUM may be invested in debt securities, meaning the portfolio consists mainly of fixed-income instruments. In contrast, the Axis Bluechip Fund focuses on investing up to 80% of its AUM in blue-chip scrips or large-cap stocks, indicating a higher equity exposure. This higher equity exposure can result in more significant risk but also the potential for higher returns.
Conclusion
In conclusion, the HDFC FMP and the Axis Bluechip Fund represent two very different approaches to investment. While HDFC FMP offers stability, liquidity at maturity, and lower risk, Axis Bluechip Fund provides flexibility, the potential for higher returns (though with a higher risk), and the opportunity for systematic investment management. Investors should consider their financial goals, risk tolerance, and investment horizon to determine which fund aligns best with their needs.