Equity Hybrid Fund: Sbi's Investment Worthy Option?

The SBI Equity Hybrid Fund is a mutual fund scheme that aims to provide investors with long-term capital appreciation and the liquidity of an open-ended scheme. It invests in a mix of debt and equity, with 65-80% of its assets in equity stocks and the remaining 20-35% in bonds. This makes it suitable for conservative or first-time equity investors as the risk is balanced through investment in fixed-income securities. However, it is important to note that this fund has a very high-risk rating and investors should be prepared for potential ups and downs in investment value.

SBI Equity Hybrid Fund's performance against its peers

SBI Equity Hybrid Fund has been deemed to have a solid performance and decent track record when compared to its peers.

Known as SBI Magnum Balanced prior to SEBI MF categorization, it is the seventh oldest balanced fund or aggressive hybrid fund and the largest with assets of 29,354 Crores.

The fund has delivered 15.44% returns since its inception 27 years ago. Over a ten-year period, the fund's returns have been comfortably above the Nifty 50 TRI return. Its 10-year annualised returns are 1.17% higher than the category average.

However, it has consistently lower annualised returns than the category average for the past 1, 3, and 5 years. Its expense ratio of 1.45% is also higher than the category average of 1.96%.

The fund has a very high-risk level and is therefore not suitable for investors who need to redeem their investment in under five years.

The fund's investment strategy

The SBI Equity Hybrid Fund is an aggressive hybrid fund that seeks to provide investors with long-term capital appreciation along with the liquidity of an open-ended scheme. The fund invests in a mix of debt and equity, with a focus on high-growth companies. Typically, 65-80% of the fund is invested in equity shares, with the remainder in bonds. This strategy makes it suitable for conservative equity investors or first-time equity investors who are not accustomed to sharp fluctuations in value.

The fund's portfolio is largely conservative, with most holdings in Large Cap stocks and debt instruments. As of 31-Jul-2023, the asset allocation was 77.76% in equity, 17.87% in debt, 3.51% in cash and cash equivalents, and 0.86% in real estate. The fund has a very high level of risk and no lock-in period.

The fund has delivered 15.44% returns since its inception 27 years ago. The expense ratio is 1.45%, and the minimum SIP amount is ₹500.

The fund's risk level

The SBI Equity Hybrid Fund is considered a high-risk investment. It is classified as an aggressive hybrid fund, which means it invests a significant portion of its assets in equity stocks, typically between 65-80%. The remaining funds are invested in bonds and fixed-income securities. While this strategy can provide higher returns than pure equity funds, it also carries a higher risk of negative returns.

As a result, the SBI Equity Hybrid Fund is suitable for conservative equity investors or first-time equity investors who are not comfortable with the sharp ups and downs of the stock market. The fund's performance has been relatively weak compared to its peers, and it has underperformed the category average in terms of annualised returns over the past 1, 3, and 5 years.

The fund has a high expense ratio of 1.39%, which is higher than the category average of 1.96%. This means that investors will pay higher fees, resulting in lower returns. Additionally, the fund has a history of poor risk-adjusted returns, as indicated by its Sharpe ratio and Treynor's ratio.

It is important to note that mutual fund investments are subject to market risks, and there is no guarantee that the fund's objective will be achieved. Investors are advised to carefully read all scheme-related documents and consult their financial advisors before making any investment decisions.

How to invest in the SBI Equity Hybrid Fund

The SBI Equity Hybrid Fund is a mutual fund scheme that aims to provide long-term capital appreciation and liquidity by investing in a mix of debt and equity. The fund has a diversified portfolio of equities from high-growth companies and fixed-income securities to balance the risk. It is important to note that this fund carries a "Very High Risk" rating.

• Understanding the Fund's Strategy: Before investing, it is crucial to comprehend the fund's investment strategy. The SBI Equity Hybrid Fund is an aggressive hybrid fund, meaning it invests 65-80% of its assets in equity stocks and the remaining 20-35% in bonds. This type of fund is suitable for conservative or first-time equity investors due to its lower volatility compared to pure equity funds.
• Assessing Your Investment Goals: Ensure that the SBI Equity Hybrid Fund aligns with your investment objectives, risk tolerance, and time horizon. This fund is intended for long-term investment, and you should be prepared for potential ups and downs in your investment value.
• Choosing a Platform: You can purchase the SBI Equity Hybrid Fund directly from the SBI Mutual Fund website or through other platforms such as MF Central and MF Utility.
• Minimum Investment Requirements: The SBI Equity Hybrid Fund has a minimum SIP (Systematic Investment Plan) investment of ₹500. This means you can start investing with a small amount and build your investment over time.
• Expense Ratio and Other Charges: The fund has an expense ratio of 1.45% as of the source date (July 2023). This is the annual fee charged for managing your investment. Additionally, there may be exit load charges if you redeem your investment within 365 days.
• Consulting a Financial Advisor: Investing in mutual funds carries market risks. It is always recommended to consult a financial advisor or tax consultant before making any investment decisions. They can provide personalised advice based on your financial situation and goals.
• Tracking Your Investment: After investing, it is essential to monitor the performance of your investment periodically. You can track the fund's performance through various online platforms and financial websites.

Remember, the SBI Equity Hybrid Fund, like any other investment, carries risks. Ensure that you carefully read the scheme-related documents and consider your investment horizon before proceeding.

The fund's historical returns

The SBI Equity Hybrid Fund has been in the market for 27 years and 7 months. It has delivered 15.44% returns since its inception. The 10-year annualised returns are higher than the category average by 1.17%. However, the fund has consistently delivered lower annualised returns than the category average for the past 1, 3, and 5 years.

The fund's portfolio is largely conservative, with most of its holdings in Large Cap stocks and debt instruments. As of 31 July 2023, the fund had invested 77.76% in equity, 17.87% in debt, 3.51% in cash and cash equivalents, and 0.86% in real estate.

The fund's NAV (Net Asset Value) as of 10 August 2023 was ₹222.4884. The AUM (Assets Under Management) as of 31 July 2023 was ₹59,810 Cr.

The expense ratio of the fund is 1.45%, and the minimum SIP amount is ₹500. It is important to note that mutual fund investments are subject to market risks, and investors are advised to carefully read all scheme-related documents before making any investment decisions.

Frequently asked questions