Sbi Multicap Fund: A Comprehensive Guide To Investing

SBI Multicap Fund is an open-ended equity scheme that invests across large, mid, and small-cap companies. The fund is managed by SBI Mutual Fund, the country's largest asset manager, and aims to provide investors with opportunities for long-term growth in capital from a diversified portfolio of equity and equity-related instruments. The minimum SIP amount for SBI Multicap Fund is ₹1,000, and the minimum lump sum investment is ₹5,000. The fund has a focused approach, investing in 25-35 stocks, and is suitable for investors with a high-risk appetite and a minimum investment tenure of 5 years.

How to start investing in the SBI Multicap Fund

SBI Multicap Fund is an open-ended equity scheme that invests across large, mid, and small-cap companies. The fund is managed by SBI Mutual Fund, the country's largest asset manager. The objective of the fund is to provide investors with opportunities for long-term growth in capital from a diversified portfolio of equity and equity-related instruments across market capitalizations.

• Understand the fund's investment strategy and risks: Before investing, it is important to understand the fund's investment strategy, which includes its unconstrained and sector-agnostic approach, active stock management with a bottom-up strategy, and high conviction play through an analyst portfolio. The fund is meant for investors with a high-risk appetite and a minimum investment horizon of 5-7 years.
• Determine your investment amount and mode: The minimum amount required to invest in the SBI Multicap Fund is Rs. 5,000 as a lump sum, and Rs. 500 as a monthly SIP (Systematic Investment Plan). You can invest through AMC (Asset Management Company), intermediaries, brokers, or online platforms.
• Consult with a financial advisor: It is always recommended to consult with a financial advisor to assess if the SBI Multicap Fund aligns with your investment goals, risk appetite, and financial situation.
• Complete the necessary paperwork: To invest in the SBI Multicap Fund, you will need to provide a valid PAN (Permanent Account Number) and fill out the necessary application forms.
• Monitor your investment: After investing, it is important to regularly review the performance of the fund and ensure that it aligns with your investment goals. Remember that mutual fund investments are subject to market risk, and past performance does not guarantee future returns.

By following these steps, you can start investing in the SBI Multicap Fund. Remember to carefully consider your investment goals, risk tolerance, and financial situation before investing.

The investment objective of the SBI Multicap Fund

The SBI Multicap Fund is an open-ended equity scheme that invests across large, mid, and small-cap companies. The fund aims to provide investors with opportunities for long-term growth in capital from a diversified portfolio of equity and equity-related instruments across market capitalizations.

The fund has a diversified allocation strategy, investing in a range of market caps to balance the portfolio and protect it from volatile markets. It is mandated to invest a minimum of 25% in large, mid, and small-caps, with the remaining 25% invested in a sector-agnostic manner. This flexible portion of the fund's investments is what sets it apart from its peers, allowing it to invest in a market cap-agnostic way.

The SBI Multicap Fund does not have any sector or style bias. It follows a bottom-up approach to stock picking, focusing on high-conviction stock ideas from a team of sector analysts. The fund aims to hold 30-35 stocks in its portfolio, which is more focused than its peers, and it is managed by R Srinivasan and Mohit Jain.

The fund is designed for investors with a long-term investment horizon, typically over five years, and a high-risk appetite. It is suitable for investors seeking capital appreciation and those with multiple investments across market capitalizations who want to consolidate through a single solution.

The benefits of investing in the SBI Multicap Fund

The SBI Multicap Fund is an open-ended equity scheme that offers investors a range of benefits. Here are some of the key advantages of investing in the SBI Multicap Fund:

Diversification and Balance:

The fund provides diversification across market capitalizations, investing in large-cap, mid-cap, and small-cap stocks. This diversification can help investors manage risk and potentially enhance returns. It also strives to maintain a balanced portfolio during volatile markets, with no sector or style bias.

Long-Term Wealth Creation:

The fund is designed for investors seeking long-term capital appreciation, typically those with a minimum 5-year investment horizon. SBI Multicap Fund aims to provide opportunities for long-term growth by investing in a diversified portfolio of equity and equity-related instruments.

High-Conviction Ideas and Active Stock Management:

The fund utilizes a bottom-up approach, prioritizing high-conviction ideas generated by a team of sector analysts. This strategy involves rigorous research and ranking of investment ideas, taking into account factors such as company fundamentals, growth potential, and management quality.

Strong Investment Expertise:

SBI Mutual Fund, the fund's manager, has a proven track record of delivering superior performance across various product categories, including large-cap, mid-cap, and small-cap funds. This expertise enhances the potential for alpha creation and long-term wealth generation.

Flexibility and Agnostic Approach:

The fund adopts an unconstrained, sector-agnostic approach, allowing it to invest in a flexible manner. This flexibility enables the fund to capture opportunities across different market segments and sectors without being limited by specific styles or sectors.

Suitable for Various Investor Profiles:

The SBI Multicap Fund can be suitable for investors with different risk appetites, particularly those with high to very high-risk tolerances. It also caters to millennials, first-time investors, and those seeking consolidation of multiple investments through a single solution.

The risks of investing in the SBI Multicap Fund

The SBI Multicap Fund is an open-ended equity scheme that invests across large, mid, and small-cap companies. While the fund offers a range of benefits, there are also several risks that investors should be aware of before investing. Here are some of the key risks associated with investing in the SBI Multicap Fund:

Risk of Loss

Investing in mutual funds, such as the SBI Multicap Fund, carries the risk of losing money. The value of investments in the fund can go down as well as up, and investors could lose some or all of their principal investment. This is inherent to investing in equity-related instruments, which are subject to market volatility.

Market Risk

The SBI Multicap Fund's tactical use of its flexible portion in mid- and small-cap stocks could expose the fund to greater market risk. While investing in smaller companies may offer higher growth potential, it also comes with higher risk. These companies may be more vulnerable to economic downturns, market fluctuations, and other factors that could negatively impact their performance.

Concentration Risk

The SBI Multicap Fund follows a focused approach, investing in 25-35 stocks. This concentration in a limited number of companies, particularly in the mid- and small-cap space, adds to the overall risk of the fund. A downturn in the performance of a few key companies could have a significant impact on the fund's overall returns.

Liquidity Risk

Mid- and small-cap stocks typically have lower liquidity than large-cap stocks. This means that it may be more difficult to buy or sell these stocks without significantly impacting their price. As a result, the fund may face challenges in effectively managing its portfolio and maintaining liquidity.

Sector Risk

While the SBI Multicap Fund aims to have no sector bias, the actual allocation of investments across sectors may vary. Certain sectors or industries may underperform or be subject to regulatory changes, market shifts, or other factors that could negatively affect the fund's performance.

Time Horizon

The SBI Multicap Fund is designed for long-term investors with a time horizon of more than five years. Early withdrawal or short-term investing may result in suboptimal returns or even losses. Mid- and small-cap stocks, in particular, may take time to unlock their growth potential.

How the SBI Multicap Fund compares to other funds

SBI Multicap Fund is an open-ended equity scheme that invests across large, mid, and small-cap companies. The fund is managed by R Srinivasan and Mohit Jain and has an absolute return orientation. The fund has no sector or style bias and follows a bottom-up approach to stock picking. The fund's benchmark index is the NIFTY 500 Multicap 50:25:25 TRI.

When compared to other funds in its category, the SBI Multicap Fund has a lower expense ratio of 0.88%, which leads to higher returns for investors. The fund has underperformed the category average by 1.57% in terms of 1-year annualised returns. However, it is important to note that the fund has a very high-risk rating.

In terms of portfolio construction, the SBI Multicap Fund invests in a diverse range of stocks across market capitalisations. As of September 2024, the fund had 35.74% investment in Large Cap stocks, 15.06% in Mid Cap stocks, and 14.15% in Small Cap stocks. This diversified approach is designed to provide investors with a balanced portfolio that can weather volatile market conditions.

When compared to its peers, the SBI Multicap Fund aims to differentiate itself by investing in a market-cap agnostic manner, rather than relying heavily on large-cap stocks. This tactical use of the flexible portion of the portfolio in mid- and small-cap stocks could boost returns but also exposes the fund to greater market risk.

Overall, the SBI Multicap Fund offers a unique approach within the multi-cap fund space, providing investors with an opportunity for long-term capital growth through a diversified portfolio. However, it is important to note that multi-cap funds are generally considered more aggressive than large and mid-cap funds due to their higher allocation to mid and small-cap stocks.

Frequently asked questions