Most investors looking for high-growth investment options to find the potential of small-sized companies are preferring to invest in Small Cap Mutual Funds. These funds mainly invest in small-cap stocks, which are typically companies with a market capitalization of less than INR 5,000 crores. They have a much higher potential for giving better returns, even though they also carry greater risk.
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What Are Small Cap Mutual Funds?
Small Cap Mutual Funds are equity mutual funds that specifically invest in lesser-known, relatively smaller businesses. These businesses, which are quite often growing, have the potential to capture their respective markets in the future. Investing in these funds enables investors to diversify their risk while seeking
How to Identify the Best Small Cap Mutual Funds
Fund Performance
Make sure you regularly view the three- to five-year track record of any small-cap mutual fund. Identify funds that have delivered the good returns in such a period.
Expense Ratio
Annual fund management fees that mutual funds charge investors are known as the expense ratio. In a low expense ratio, more of your money is invested as opposed to paying fees.
Fund Manager's Expertise
A fund manager's knowledge and experience will determine the success of a small-cap fund. Research the background of a fund manager and see how he would have handled market turmoil and what he will do to select small-cap stocks.
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Risk-Return Profile
Since small-cap stocks are more volatile, small-cap mutual funds are more risky than large-cap or mid-cap funds. Hence, one must have a risk appetite before investing in these mutual funds.
Portfolio Composition
The risk level of the small-cap fund can be established with the help of studying the portfolio. Diversification of portfolios across industries and sectors will reduce the impact of poor performance in any one sector.
Investment Horizon
Small-cap funds provide the best returns over a long period of nearly seven to ten years or more. In order to achieve the maximum returns on your investment and avoid the vagaries of transitory market fluctuations, you require a long term investment period.
Best Small Cap Mutual Funds in India
- Bank of India Small Cap Fund
- Baroda BNP Paribas Small Cap Fund
- Sundaram Small Cap Fund
- UTI Small Cap Fund
- Kotak Small Cap Fund
- PGIM India Small Cap Fund
- SBI Small Cap Fund
Final Words
Small Cap Mutual Funds can be a very attractive investment for investors who have a long-term horizon and a high risk tolerance. You can make the most appropriate choices of small-cap mutual funds to invest in your portfolio. When you approach investing in small-cap mutual funds with a careful analysis and a long-term perspective, then you could achieve high growth potential.
Moreover, investors can get in touch with us at 9810325138 to be more insightful before investing and create a future with financial freedom.
Disclaimer
Investments in Mutual Funds are subject to market risks; carefully read all documents related to the scheme. This information is intended only for educational purposes and does not offer any recommendation whatsoever of any particular mutual fund scheme by RKFS. We are not responsible if you make profits or suffer losses while investing through these schemes.
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