Understanding Small Cap Mutual Funds
Small-cap funds invest in small-sized companies by market capitalisation in India. These funds offer relatively higher returns compared to mid and large-cap funds. As per regulations, small-cap funds should invest at least 65% of their assets in small-sized companies.
Small-cap funds have immense growth potential, although it comes with higher risk.
These funds are for aggressive investors with high risk-taking capability.
Held for at least 10 years.
Top schemes of Small Cap Mutual Funds
| Fund Name | Returns | Actions | ||
|---|---|---|---|---|
| 1 Year | 3 Year | 5 Year | ||
Returns calculator
Total Invested : ₹ 6,00,000
Profit : ₹ 56,200,000
Current value : ₹ 1,16,20,000
Frequently Asked Questions
Which is the best small-cap mutual fund?
You can find the best small-cap mutual fund with a simple Google search. It will give you a list of top funds with the highest returns or based on past performance. However, selecting funds based on past performance is like driving a car and seeing the rear-view mirror.
Is it good to invest in small-cap funds?
It is rewarding to invest in small-cap funds because they offer great potential for superior returns. However, note that small-cap funds come with high risk and may not perform for a prolonged period.
Should we invest in small-cap mutual funds?
Small-cap funds can be a good addition to your portfolio if you are comfortable with huge fluctuations, illiquidity risk, and longer recovery periods.
What are the differences between small-cap, mid-cap, and large-cap mutual funds in India?
Small-cap funds - Invest in companies in their early growth phase. These are like startups with big dreams-some will explode in value, while others might fade into irrelevance.
Mid-cap funds - These represent companies that have survived their startup phase and are now aggressively expanding. They are like fast-growing young businesses scaling up.
Large-cap funds - These invest in industry giants-stable, well-established businesses that have already made their mark and dominate their sectors.
Is it good to invest in a small-cap mutual fund compared to a mid-cap mutual fund?
Choose small-cap funds if:
You are aggressive and can tolerate huge swings.
You have a long-term (10+ years) view.
You want multibagger potential (stocks that grow 10x).
You are investing via SIP to average out market fluctuations.
Choose mid-cap funds if:
You want high growth but with lower risk than small caps
You have a 7-year investment horizon.
You want companies that are past the startup phase but still growing rapidly.
You are okay with moderate volatility.
Should I have small-cap mutual funds in my portfolio?
It depends on your goals, risk tolerance, and time horizon. Consider small-cap funds only when you invest for 10+ years.
Are small-cap funds safe?
If you compare it with large-cap or mid-cap funds, small-cap funds are not safe. They are a high-risk, high-reward investment.
How do I choose a small-cap fund?
To choose a small-cap fund, look at past returns or star ratings. Here is a practical approach to it:
Understand the investment philosophy of the fund
See the rolling returns of the fund for a consistency check
Check the market capture ratio to see performance in bull and bear markets
Who should invest in small-cap mutual funds?
Those who can handle the high volatility
Someone who wants to invest in smaller companies and benefit from the growth
Investors who need an aggressive option for the satellite part of their portfolio
Those who want to invest for over 10 years