Should I Continue My SIP Investment in LT Business Emerging Funds?
Investing in mutual funds requires a long-term approach and adequate research. The LT Business Emerging fund, which is a small cap fund managed by LT Mutual Fund (LT MF AMC), has faced underperformance in recent years. However, assessing the future potential of small cap funds should be approached with careful consideration and a broader perspective.
Overview of LT Business Emerging Fund
The LT Business Emerging Fund, which was launched on 12 May 2014, has a benchmark index of SP BSE Small Cap TRI. The risk associated with this fund is relatively high, reflecting its classification as an open-ended scheme. The fund's assets stand at Rs.4697 Crore, and the expense ratio is 2.05%. The risk and return grades are average, as is the turnover rate of 28.5. A unique feature of this fund is an exit load of 1% applicable for exits made within 365 days.
Performance and Risk Assessment
Understanding the performance of the LT Business Emerging Fund, it’s important to consider the historical return rates. Over the past one year, the fund has yielded -16.51%, but if we look at the 5-year performance, the returns have been positive at 5%. Let’s break down the specific metrics:
Monthly Return: One month - 3.82%, 3 month - 12.11%, 6 month - -21.83%, 1 year - -16.51%, 3 years - -8.45%, 5 years - 5% Risk Measures: Standard Deviation - 25.64, Sharpe Ratio - -0.38, Sortino Ratio - -0.39, Beta - 0.85, Alpha - 0.01The standard deviation of 25.64 indicates a high level of volatility, and the negative Sharpe and Sortino Ratios suggest that the returns may not be sufficiently compensating for the risk taken. The Beta of 0.85 is quite good, as it indicates lower sensitivity to market movements. The Alpha of 0.01 suggests the fund has not significantly outperformed its benchmark over the years.
Strategic Considerations
Small cap funds are suitable for aggressive investors. Historically, they provide higher returns if held for a long-term period, typically ranging from 6 to 8 years. However, the past few months have seen a recovery in Small Cap funds. It’s crucial to revisit your investment horizon and risk tolerance before making any changes.
Conclusion
The decision on whether to continue your Systematic Investment Plan (SIP) in the LT Business Emerging fund requires careful thought. While the fund has underperformed recently, it's important not to make hasty decisions based on short-term market fluctuations. The industry's trend towards blind prediction should be avoided, as past performance does not guarantee future results.
Instead, consider the broader market trends and the potential for improvements in the future. Keep in mind that the LT MF AMC, a reputable player in the mutual fund industry, is likely to perform well in the future. Patience and a long-term strategy are key to success in small cap investments.
By maintaining a long-term perspective of 15 years, you can mitigate the risks associated with short-term volatility and increase your chances of realizing better returns over time.