Nippon India Small Cap
Small-cap funds are known for delivering higher returns, but there is a caveat. They deliver in the long term, say, 7-10 years, and are highly volatile in the short run.
Nippon India Small Cap Fund is one with a proven long-term performance history. If you look at its performance on an annual basis, the fund has outperformed its respective benchmark, Nifty Smallcap 250 TRI, with a decent margin in the last 10 years.
The fund follows prudent risk management measures like margin of safety and diversification across sectors and stocks, with a view to generate relatively better risk-adjusted performance over a period of time.
As on July 31, 2022, the fund has invested across 162 stocks from various sectors. The fund stays true to its objective of remaining invested in small-caps; 69 per cent of its portfolio consists of companies having market cap of less than Rs 16,500 crore.
If you have invested adequately in large- and mid-cap funds and want to add a small-cap fund in your portfolio, Nippon India Small Cap could be an option.
SBI Equity Hybrid Fund
Hybrid funds are close cousins to pure equity funds—they provide growth with lesser volatility and are taxed like equity funds. SBI Equity Hybrid Fund (SEHF) is one the best performing funds in this space.
The fund follows a 75-25 equity debt asset allocation strategy. Within equity allocation, the fund invests 50 per cent in large-cap stocks, which provide stability during volatility. The remaining 50 per cent of equity is allocated to mid- and small-cap stocks, which boosts returns. As on July 31, 2022, the fund has deployed around 70 per cent of its equity portion in 4o stocks across sectors.
In terms of debt allocation, the fund manager prefers to stick with high-quality papers. Of the total debt allocation, the fund invests 50 per cent of the corpus in high-yield paper with rating above A-. The remaining debt component is deployed in government securities and other highly-rated papers according to market and prevailing interest rate scenarios. This strategy has worked well in favour of funds delivering superior long-term returns. Investors who want to play safe with equity may consider investing in this fund.