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Who should Invest in Small Cap Funds?

Mutual Funds62 views

Highlights

  • A high return equity instrument which has generated 5-year returns upto 17.72%
  • Small Cap Funds have the potential to generate multi bagger returns, in times when the market is in full swing.

Small Cap Funds are type of equity schemes that invest 80% of their corpus in the stocks of small cap companies. These companies are mostly startups and small enterprises which have immense growth potential. And thus, the returns expected out of them is also high. Often, people get disheartened by the returns that small cap funds offer in one year. But, one should understand that these funds perform well if the investment horizon is atleast seven to ten years.

As these companies are new, meaning they are not well-established like other large cap and mid cap companies, they run a high risk of failing and prospering too. Implying that the stocks of these companies are extremely volatile. Investing in small cap funds can offer you both exceptional and horrific returns. It carries the most amount of risk when compared to other funds. This is the avenue for investors who are looking for high returns with a high risk appetite. So, if you are a cautious investor with a low investment horizon, this fund is not meant for you.

Investing in small cap funds should not be an impulsive activity. Before investing in small cap funds one should definitely evaluate their risk appetite, analyze their financial goals and decide their investment horizon. As small cap funds are extremely risky, it needs to be researched and analyzed properly before investing. New investors might be allured by the concept of small cap funds being a multi bagger in the long run, but do remember, there are high chances of it plunging down too.

What are the Advantages of Investing in Small Cap Equity Funds?

Multibagger Returns: When the market is in full swing, small cap funds can give multibagger returns (a financial term used in respect to equity terms that give more than 100% returns).

Usually Untapped: Small cap equity funds are generally go unnoticed by institutional investors as they normally invest in funds that are more stable like large cap funds. This gives the opportunity to aggressive investors to make the most out of it.

Recommended Small Cap Funds To Invest In!

Fund NameRiskometer1-Year Return 3-Year Return 5-Year return 
Franklin India Smaller Companies FundModerately High-19.08%0.93%9.55%
Reliance Small Cap FundModerately High-18.02%7.65%12.83%
SBI Small Cap FundModerately High-14.23%10.58%17.72%
DSP Small Cap Fund Moderately High-16.72%-0.35%11.30%
HDFC Small Cap FundModerately High-18.45%8.43%11.87%

Note: All the data  that has been mentioned in this article is sourced from Value Research as on Aug 06, 2019. The return data here is in regards to Regular Plan.

How to Invest in Small Cap Funds Online?

If you wish to invest in Small Cap Funds, you can do so through Wishfin, a financial marketplace, where you can choose the best sector funds for you and rule out the ones that doesn’t seem a great fit by comparing. To invest, all you have to do is follow the below mentioned steps:

  • Log on to www.wishfin.com
  • Go  to ‘Mutual Funds’
  • Click on on ‘Login/Register
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If you are a new investor who is keen on investing, you need to follow the below mentioned registration process.

Registration Steps:

  • Mention your mobile number
  • Click on ‘Next’
  • Enter the One-time Password (OTP) received on your mobile number
  • Click on ‘Verify and Continue’
  • Mention full name, email, city
  • Create a password that must have the required number of alphabets, numeric and special characters
  • Click on ‘Sign Up’
  • Mention a few more details before the registration can be made successfully


Login Steps

  • Mention your email or mobile number
  • Click on ‘Get OTP’ to receive the same
  • Enter OTP at the prescribed space
  • Click on ‘Login’
  • Go to ‘Explore Mutual Funds’
  • Go to ‘Equity’ and then on to ‘Small Cap Funds’
  • Click on ‘Invest’ below any of the sector funds shown above

Disclaimer: Mutual Fund Investments are subject to market risks, read all scheme related documents carefully before investing.