The SBI Small Cap Fund has emerged as a prominent investment choice for retail investors opting for high growth through equity markets. As of May 2025, the fund has displayed impressive performance making it a compelling option for long term investors.
In the last 5 years the SBI Small Cap Fund direct plan growth has given an absolute return of 284.68%. Now, this translates to an annualised return (CAGR) of 28.44%, meaning the fund grew by an average of 28.44% per year over five years. Here are five key factors to consider before thinking of investing in this fund:
1. Robust performance track record
The SBI Small Cap Fund has delivered strong returns over various time frames. As of 8 May 2025, the fund’s performance is as follows:
Source: SBI Small Cap Fund
These figures indicate the fund’s consistent ability to churn out returns, aligning with the primary goal of long term capital appreciation. SBI’s objective behind the creation of these small cap funds is to provide investors with considerable wealth generation over a longer period. These funds generally also carry more risk, volatility and possibility of underperformance in comparison with large cap funds.
2. Expense ratio and SIP returns
The fund’s expense ratio is approximately 1.58% for the regular plan, which is competitive within the industry. For investors opting for Systematic Investment Plans (SIPs), the returns are as follows:
Source: SBI Small Cap Fund
These figures highlight the potential benefits of long-term SIP investments in the fund.
3. Risk considerations
The SBI Small Cap Fund has shown better performance than the Nifty 50 benchmark in the last five years, with the benchmark index giving an absolute return of 163.75% in comparison to the SBI Small cap fund that has given an absolute return of 284.68% during the same duration.
Given the performance of SBI Small cap fund has been significantly better than the Nifty 50 benchmark, still it is important to acknowledge the fact that these funds come with increased risk of capital depreciation and volatility especially in economic downturns and recessions.
4. Asset allocation
According to Value Research, as of May 2025, the fund’s asset allocation is as follows:
- Equity: 88.03%
- Cash & Cash Equivalents: 8.99%
- Debt: 2.98%
Source: Value Research
This allocation clearly reflects the fund’s focus on equity oriented investments, adjoining with its target of capital appreciation.
5. Suitability for investors
This equity mutual fund is suitable for investors who have a long term horizon of 5 to 7 years. It also comes with a potential of higher returns with high risk. This fund is particularly appropriate for those looking to diversify their portfolio with small-cap equity exposure.
Conclusion
Therefore, prudent investors should carefully consider the above discussed returns and data, and post the same discuss their financial goals and aspirations with a certified financial advisor before thinking of investing in this fund. As investments in equity markets carry its own set of risks.
Disclaimer: Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing.
