Choosing the Best Small Cap Mutual Fund for Long-Term Growth: SBI Small Cap vs. Axis Small Cap
The stock market offers numerous investment options, including various small cap mutual funds. However, selecting the right fund can be challenging. This article aims to assist you in making an informed decision between SBI Small Cap and Axis Small Cap, two popular small cap mutual funds.
Overview of SBI Small Cap vs. Axis Small Cap
Both SBI Small Cap Fund and Axis Small Cap Fund are notable players in the small cap mutual fund space, each with its own strengths. Let’s delve into the key aspects of these funds to help you make a well-informed choice.
Key Differences Between SBI and Axis Small Cap Fund
Expense Ratio: One of the key differentiators is the expense ratio. The Axis Small Cap Fund has a lower expense ratio, making it more cost-effective in the long run. This can have a significant impact on your investment returns.
Management Tenure: SBI Small Cap Fund has been managed since 2013, providing a longer track record. On the other hand, the Axis Small Cap Fund is a newer fund, launched more recently. This means that while SBI has more historical data, Axis has the potential for faster growth given its youthful management.
Asset Under Management (AUM): SBI has a larger AUM, which is often seen as a testament to its trustworthiness. However, a larger AUM can sometimes present challenges, especially if you are looking for higher future growth. Axis Small Cap Fund's smaller AUM could offer more opportunity for growth.
Comparative Performance
Both funds have performed well, delivering excellent returns. In the short run, SBI’s track record can be a deciding factor. Over a 7-year period, SBI and Axis funds have shown a slight advantage for SBI, with a difference of about 1-2%. While this difference might seem small, it can be significant when it comes to compounded returns over long periods.
It is important to note that these returns are based on past performance and should not be the sole deciding factor. Market conditions change, and past performance does not guarantee future results. A thorough analysis is recommended before making any investment decisions.
Conclusion: A Case for Axis Small Cap Fund
While SBI Small Cap Fund has a solid track record and a bigger AUM, the newer Axis Small Cap Fund has several advantages. Given its lower expense ratio, potential for faster growth, and overall cost-effectiveness, Axis Small Cap Fund emerges as a strong contender for long-term investment. However, it’s crucial to note that investing in mutual funds involves risks, and past performance does not guarantee future results.
For a well-rounded investment strategy, it might also be worth considering additional funds such as the Tata Small Cap Fund, which has demonstrated excellent performance and a balanced approach in diversification. Despite being launched just four years ago, the Tata Small Cap Fund offers a competitive expense ratio and diversified portfolio.
Advisory Note: Before finalizing your investment, discuss your options with a financial advisor. They can provide personalized advice based on your financial goals, risk tolerance, and other factors.
Happy Investing!