Micro Cap Fund: Dsp Blackrock's Smart Investment Option

The DSP BlackRock Micro Cap Fund is a mutual fund scheme that aims for long-term capital appreciation by investing in small-cap companies. In February 2017, the fund stopped accepting fresh applications, causing concern among investors. However, the fund manager assured that existing SIPs would continue, and the safety of investments was guaranteed. The fund's performance has been strong, making it a top choice in its category. The fund has a conservative investment strategy, focusing on large-cap stocks and debt instruments. It carries a very high risk, making it suitable for investors with a long-term horizon of at least seven to ten years.

The aim of the fund is to seek long-term capital appreciation by investing in small-cap companies

The DSP Small Cap Direct Plan Growth fund is a mutual fund scheme launched by DSP Mutual Fund in December 1996. The fund aims to achieve long-term capital appreciation by investing in small-cap companies.

DSP Small Cap Direct Plan Growth is a high-risk fund with an expense ratio of 0.84% and an exit load of 1% if redeemed within 12 months. The fund has delivered returns of 17.58% since its inception and currently has an Asset Under Management (AUM) of ₹1,67,044 Crore. As of October 2024, the latest Net Asset Value (NAV) is ₹221.85.

The fund follows a conservative investment strategy, with most of its holdings in Large Cap stocks and debt instruments. It is important to note that small-cap funds tend to experience more significant ups and downs compared to funds investing in larger companies. Therefore, investors should be prepared for the possibility of higher losses and ensure they have a long-term investment horizon of at least seven to ten years.

The fund manager, Vinit Sambre, also manages other schemes such as the DSP BlackRock Small and Midcap fund, which has a similar portfolio. Investors seeking to invest in small and mid-cap funds should consider the risks involved and ensure a long-term investment horizon.

The fund has a very high risk level

The DSP BlackRock Micro Cap Fund is rated as a very high-risk investment option. This is because the fund invests in smaller companies, and such funds tend to experience more significant drops than those that invest in larger companies when stock prices fall. As a result, while investors can anticipate higher returns in the long term, they should also be prepared for the possibility of more severe ups and downs.

The fund's high-risk nature is further emphasised by the warning that investors should not invest in this or any other small-cap fund if they need to redeem their investment in less than seven years. The fund's performance is also tied to the small-cap space, which means that the fund manager may struggle to deploy fresh inflows due to a limited number of suitable stocks available in this market segment.

Additionally, the fund has a history of temporarily stopping fresh applications, both lump-sum and SIPs, which can be concerning for investors who are looking to increase their investments. The decision to halt fresh inflows may be attributed to the fund becoming over-sized, and the fund manager's desire to keep the Assets Under Management (AUM) within a manageable limit.

In conclusion, while the DSP BlackRock Micro Cap Fund has the potential for high returns, it also carries a very high level of risk. Investors considering this fund should carefully evaluate their risk tolerance and ensure they have a long-term investment horizon before making any decisions.

The expense ratio is 0.84%

The expense ratio of the DSP BlackRock Micro Cap Fund is 0.84%. This is a relatively low expense ratio, which is a positive sign for investors. The expense ratio is the fee that a mutual fund house charges for managing your mutual fund investments. It includes administrative costs, management fees, advertising, and other expenses. A lower expense ratio is generally preferable, as it leads to higher returns for investors.

In the case of the DSP BlackRock Micro Cap Fund, the expense ratio of 0.84% is lower than the category average, indicating that the fund is competitively priced in terms of fees. This means that a smaller portion of the fund's assets is being used for administrative and other expenses, leaving more for investment and potential returns.

It is important to note that while a low expense ratio is favourable, it should not be the sole factor in deciding whether to invest in a particular fund. Other factors to consider include the fund's performance, investment objective, risk level, and the expertise of the fund managers.

Regarding the DSP BlackRock Micro Cap Fund, it is worth noting that the fund has performed well in its category, being one of the top performers. However, it is important to remember that small-cap funds, in general, carry higher risks and are suitable for investors with a long-term investment horizon.

In summary, while the expense ratio of 0.84% for the DSP BlackRock Micro Cap Fund is attractive, potential investors should also carefully consider other aspects of the fund and their own investment goals and risk tolerance before making a decision.

The fund has a conservative investment strategy

The DSP BlackRock Micro Cap Fund is a mutual fund scheme that aims for long-term capital appreciation by investing in small-cap companies. While the fund is considered to have a very high risk, its holdings are mostly in large-cap stocks and debt instruments, indicating a conservative investment strategy.

The fund's investment objective is to seek long-term capital appreciation by investing primarily in small-cap companies. This means that it focuses on investing in smaller companies, which can offer higher returns but also carry more risk. As a result, investors are advised to only consider this fund if they have a long-term investment horizon of at least seven to ten years.

The fund's portfolio reflects a conservative strategy, with a significant portion invested in large-cap stocks and debt instruments. This approach helps balance the risk associated with small-cap investments and provides a more stable foundation for the fund.

The fund's conservative strategy is further evident in its performance. While it is considered one of the top performers in its category, it has temporarily stopped accepting new applications to manage its large corpus effectively. This decision demonstrates a cautious approach to ensure the fund remains manageable and that fresh inflows can be deployed appropriately.

Overall, while the DSP BlackRock Micro Cap Fund offers potential for long-term capital appreciation through investments in small-cap companies, its conservative investment strategy seeks to balance the risk by including large-cap stocks and debt instruments in its portfolio.

The fund is managed by Vinit Sambre and Jay Kothari

The DSP BlackRock Micro Cap Fund is managed by Vinit Sambre and Jay Kothari. Sambre has been managing strategies at DSP BlackRock since July 2007, when he joined as a portfolio analyst for the firm's Portfolio Management Services (PMS) division. Prior to his time at DSP BlackRock, Sambre worked at DSP Merrill Lynch as part of its Global Private Client business and at UTI Investment Advisory Services as an equity analyst for the India Growth Fund. He is a Chartered Accountant from the Institute of Chartered Accountants of India.

Kothari, on the other hand, is a Space and Quantum Enthusiast who lives by the quote, "Think Globally, Act Locally." He has contributed to articles on LinkedIn about trend analysis tools, strategic planning, customer feedback, exit options for businesses, and company valuation. He has also been recommended by a former teammate from the University of Cincinnati's Venture Capital Investment Competition team, who praised his knowledge, intellect, and willingness to listen and learn.

The DSP BlackRock Micro Cap Fund falls under the category of Small Cap Funds, which invest in stocks from the small-cap category, excluding the largest 250 stocks by market capitalization. This particular fund has had relatively weak performance among its peers, with a size of ₹ 16704.97 Cr, an expense ratio of 1.7%, and a standard deviation value indicating volatile fund returns.

As with any mutual fund investment, there are risks involved, and investors should consider their investment goals and risk tolerance before deciding whether to invest in the DSP BlackRock Micro Cap Fund.

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