L&T Emerging Business Fund: Worth Investing?

The L&T Emerging Businesses Fund is an equity small-cap fund that aims to generate long-term capital growth from a diversified portfolio of predominantly small-cap companies. The fund has a very high-risk category and has provided returns of 43.9% over the last year, 27.4% over three years, 33.3% over five years, and 24.4% since its inception. With a minimum SIP amount of INR 500 and a minimum lump sum investment of INR 5000, the fund offers investors exposure to the Indian equity markets, with a focus on emerging companies. However, it's important to note that past performance does not guarantee future returns, and mutual fund investments are subject to market risks.

L&T Emerging Businesses Fund's performance over the years

L&T Emerging Businesses Fund is an equity-based small-cap fund launched on May 12, 2014. It is a high-risk fund that has given a Compound Annual Growth Rate (CAGR) return of 23.7% since its launch. The fund was ranked 2nd in the Small Cap category.

• 2023: 46.1%
• 2022: 1%
• 2021: 77.4%
• 2020: -14.5% (data from a different source)
• 3-year return (as of October 26, 2024): 27.4%
• 5-year return (as of October 26, 2024): 33.3%
• Since inception (as of October 26, 2024): 24.4%

The fund's Net Asset Value (NAV) as of July 8, 2024, was ₹85.9717, with a decrease of -0.47 (-0.55%) from the previous day. The fund's performance can be further analysed by looking at its top holdings, portfolio allocation, and historical annual returns.

As of October 26, 2024, the fund's top holdings included:

• Apar Industries Ltd (Industrials)
• Brigade Enterprises Ltd (Real Estate)
• KEI Industries Ltd (Industrials)
• Techno Electric & Engineering Co Ltd (Industrials)
• EIH Ltd (Consumer Cyclical)

The fund's portfolio is diversified, investing predominantly in equity and equity-related securities of emerging companies (small-cap stocks) in the Indian markets. It may also invest in foreign securities.

In summary, L&T Emerging Businesses Fund has shown strong performance over the years, with a high CAGR since its launch. However, as with any investment, it is important to note that past performance does not guarantee future results, and investors should carefully consider their risk tolerance and investment objectives before making any decisions.

The risk category of the investment

The L&T Emerging Businesses Fund is a high-risk investment option. It is an equity-small cap fund that has delivered a CAGR return of 23.7% since its launch in May 2014. The fund's performance has varied over the years, with a return of 46.1% in 2023, 1% in 2022, and 77.4% in 2021.

As per SEBI regulations, mutual funds are classified into five levels of risk: low, moderately low, moderate, moderately high, and high. The L&T Emerging Businesses Growth Direct Plan falls under the "'very high risk' category, which is the highest level of risk. This means that investors could potentially lose a significant portion of their principal investment.

The fund aims to generate long-term capital appreciation by investing in a diversified portfolio of predominantly equity and equity-related securities, including equity derivatives, in the Indian markets. The fund focuses on emerging companies, primarily small-cap stocks, and has the flexibility to invest in foreign securities as well.

The top holdings of the fund include Apar Industries Ltd, Techno Electric & Engineering Co Ltd, KPIT Technologies Ltd, and Brigade Enterprises Ltd. The fund's performance has been average compared to its peers, and it has a relatively high expense ratio of 1.67-1.68%, which is deducted from the Net Asset Value (NAV) on a daily basis.

It is important to note that past performance does not guarantee future results, and investors should carefully consider their risk tolerance and investment objectives before investing in the L&T Emerging Businesses Fund.

The top holdings of the fund

The L&T Emerging Businesses Fund is an equity-based small-cap fund with a high-risk category. The fund's top holdings as of 26 October 2024 are:

• Apar Industries Ltd (3.47%)
• Treps (3.05%)
• Techno Electric & Engineering Co Ltd (2.60%)
• NCC Ltd (2.39%)
• KPIT Technologies Ltd (2.39%)
• Sonata Software Ltd (2.36%)
• Brigade Enterprises Ltd (2.25%)
• Century Textiles & Industries Ltd (2.22%)
• KEI Industries Ltd (2.11%)
• Trent Ltd (2.00%)

The fund has a diversified portfolio of predominantly equity and equity-related securities, with a focus on emerging companies (small-cap stocks) in the Indian markets. It also has the flexibility to invest in foreign securities.

The fund's expense ratio

The expense ratio of a mutual fund is the annual fee it charges to manage your money. You don't pay this fee explicitly, but it is deducted from the Net Asset Value (NAV) on a daily basis. For example, if you have invested 10,000 and the expense ratio is 2%, you pay 200 as fees to invest in mutual funds.

The L&T Emerging Businesses Fund is a high-risk, equity-based small-cap fund. As of 26 October 2024, the expense ratio of the L&T Emerging Businesses Growth Direct Plan is 0.67%. This is a direct fund, which has a lower expense ratio than a regular fund because there is no commission paid to a broker or distributor.

The expense ratio of the L&T Mutual Fund's Regular Plan was 1.67% on 25 October 2024 and 1.68% on 11 October 2024. This is higher than the direct plan's expense ratio, as the regular plan includes commission to a mutual fund broker or distributor.

The L&T Emerging Businesses Fund was launched on 12 May 2014 and has delivered a Compound Annual Growth Rate (CAGR) return of 23.7% since its launch. It is ranked 2nd in the Small Cap category.

The tax on the fund's gains

The L&T Emerging Businesses Growth Direct Plan is an equity mutual fund. The capital gains made from this fund are taxed at different rates depending on the length of time you hold your units for. If you hold your units for 1 year or more, long-term capital gains tax applies, and you will be taxed at a rate of 10%. If you hold your units for less than a year, short-term capital gains tax applies, and you will be taxed at a rate of 15%.

In general, capital gains taxes are the taxes you pay on profits made from the sale of assets, such as stocks or real estate. The amount of capital gains tax you pay depends on what you sold, how long you owned it for before selling, your taxable income, and your filing status. Holding an asset for longer than a year before selling it generally results in a more favourable tax rate of 0% to 20%. Assets sold within a year or less of ownership are subject to regular income tax rates, which range from 10% to 37%.

It is important to note that capital gains taxes apply to assets that are ""realized", or sold. This means that the returns on stocks, bonds, or other investments purchased through and held within a brokerage are not subject to capital gains tax. However, there is an exception for investments that produce dividends. In this case, even if the underlying stock remains unsold, the income received from certain dividends may be considered a capital gain.

Additionally, assets held within tax-advantaged accounts, such as 401(k)s or IRAs, are not subject to capital gains taxes while they remain in the account. Instead, you may pay regular income taxes when you make a qualified withdrawal, depending on the type of account.

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