Is Motilal Oswal Small Cap Fund Good for Long Term Investing?
In the last financial year, 2024, the Motilal Oswal Small Cap Fund returned 45.98%, beating both its category average and benchmark returns. However, does it speak to this scheme being a good investment for the long term? Let's find out.
Being introduced on 1st December 2023, it is a newcomer in the small cap category but also makes it a standout performer amongst its peers. This stellar opening by the fund shows the capability of being a good investment in the long run.
But as actions speak louder than words, this analysis explores this small cap fund inside out, reviewing it in every parameter, stock quality, portfolio allocation, investing style and management.
This will help you decide if this scheme is worth putting your hard-earned money into or not.
Long Term Investment Approach
This Small Cap Mutual Fund is known for its long-term investing style that uses a unique method called "GARP". It stands for growth at a reasonable price meaning it invests in companies that give you strong earning margins rather than investing in undervalued ones. This style balances a perfect blend of growth and value investing in a single scheme, just like killing two birds with one stone.
Well, seeing the actual performance in numbers will do more good than listening about how good the planning is. Read on in the next heading to know how much returns this small cap fund made since launch.
What is the Return of Motilal Oswal Small Cap Fund?
Being a newcomer in the market, the Motilal Oswal Small Cap Fund has delivered an outstanding annualized of 45.98%, beating both the category and benchmark returns of 26.85% and 27.21%, respectively.
You can refer to the graph below for the data:
The above graph shows the excellence of the investing strategy applied by the fund manager here. Delivering such high returns in this short span since its launch speaks to the good quality and potential of Small Cap Mutual Funds to continue this stellar performance in the future and increases the possibility of becoming a good long-term investment for you.
So, it’s a great time to start your investment journey with the Motilal Oswal Small Cap Fund now and earn better than others.
Real-Life Example of How Much Your Investment Would Worth.
Just imagine, what if you had invested in the scheme last year? Let’s say you started a monthly investment of Rs.3,000 in the Motilal Oswal Small Cap Fund from January 2024. Then by the end of the year, your investment amount will be Rs.36,000.
Now, what is 45.98% of Rs.36,000? The correct answer is Rs.16,552. You must have calculated it very fast. When it is about money, everyone likes math.
Anyway, after adding this amount to the investment amount, you will have Rs.35,000. It is almost double, what you have invested.
This reminds you of the saying, “Better be late than be sorry”, you can start a systematic investment plan in this scheme on today’s date.
Well, while being on the subject let’s learn some more insightful information that makes this scheme standout performer amongst its peers.
What is the Asset Allocation of Motilal Oswal Small Cap Fund?
This small cap fund purely allocated 95% of its money in the Equity Mutual Funds category, keeping only 2.5% in debt mutual funds and remaining in cash and its equivalents.
Motilal Oswal Mutual Fund targets equity funds mostly due to their potential to give higher returns. For a better understanding, you can see the chart below:
But you can find such asset allocation in almost every Mutual Funds scheme, then what makes the Motilal Oswal Small Cap Fund better than others? For this, you will have to read the next section.
Smart Investments, Bigger Returns
Sector Allocation of Motilal Oswal Small Cap Fund
As they say, behind the success of any mutual fund scheme, there is the portfolio. The more diverse a portfolio is, the higher the returns will be.
The Motilal Oswal Small Cap Fund regular growth has invested 25.61% in the consumer discretionary sector which is the highest of all. The scheme has also invested 18.96% of funds in the industrial sectors considering their potential. Other than these, the scheme has invested in the financial sector (11.69%), the healthcare sector (11.29%) and 9.36% in the materials sector.
All of these sectors are the most promising. The fund manager, Mr Niket Shah actively adjusts the portfolio according to how the market performs, keeping the fund tilted towards making profits in the long term.
Now, let’s understand why you should trust the Motilal Oswal Small Cap Fund-regular growth.
Why Motilal Oswal Small Cap Mutual Fund is Good for Long Term?
Here are the following points that highlight the reasons that make this fund good for long-term investment:
Master Minds at the Backstage
Mr. Niket Shah is the leading fund manager of Motilal Oswal Small Cap Fund regular growth. With years of experience in equity research and small and mid-cap funds, Mr Shah and his team are managing the fund in the best way possible.
Quality and Growth
The unique investment philosophy of the Motilal Oswal Mutual Fund focuses on quality, growth, longevity and reasonable price (QGLP). This investment philosophy demands discipline of patience over long years. This is why the Motilal Oswal Small Cap Fund has been able to give you such great returns.
Diversified Portfolio
As you have already seen, the mutual fund scheme has invested in different sectors. Portfolio diversification is beneficial for several reasons, like the reduction of risks, returns with a high level of consistency, etc. Besides, over a long duration, it also protects your investment against market volatility.
High Conviction Stocks
Some mutual fund schemes hold more than 100 stocks thus making it difficult to manage the fund and analyze them. The Motilal Oswal Small Cap Fund regular growth has recognized this mistake and hence is restricted to holding around 35 stocks only. Such a high level of conviction is responsible for making huge returns at the end of 2024.
Final Thoughts: Who Can Invest?
Now that you know how good the Motilal Oswal Small Cap Fund is, you must be thinking of investing in the scheme. But wait, what if this scheme does not correctly match your financial goals?
Before you make any decision, let’s understand who can invest in the scheme.
- Investors who have a stable source of income to make SIP or lump sum investments.
- If you are looking to invest for the long term, this scheme is a perfect fit for an investment duration of 5+ years.
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