Small cap funds are some of the high-risk mutual funds and thus carry the potential for good returns as well. According to SEBI, small cap funds are required to make a minimum 65% investment in small-cap stocks. Small cap funds are volatile and feature a lot of risks as the stock prices of small cap firms can get affected by little market turmoil.
Let’s know the best small cap mutual funds in India along with the benefits of investing in these.
Best Small Cap Mutual Funds, 2023
The below-mentioned are the top small cap mutual funds available in India:
|Axis Small Cap Direct||Very High-Above Average|
|Bank of India Small Cap Direct||Very High-Above Average|
|Canara Robeco Small Cap Direct||Very High-High|
|Edelweiss Small Cap Direct||Very High-Above Average|
|ICICI Pru Small Cap Direct||Very High-Above Average|
Also Read: Best Large-Cap Funds
Benefits of Investing in Small Cap Funds
Many financial and stock market experts advise individuals to allocate a modest part of their assets to the best small cap mutual funds. Here are the reasons:
- Yield massive returns
A small cap fund’s market value is especially susceptible to the performance of its risk conditions. Nonetheless, it is the perfect chance for traders who are ready to take a chance and want to grow their investment swiftly.
- Good for short-term investment
Small cap mutual funds are appropriate for users with a four-to six-year investment horizon. These stocks have enormous growth potential and ambitious development tactics.
With all these merits, there is a major drawback to small cap funds: Highly risky and Volatile
Small cap funds involve a higher degree of risks and volatility when compared to large-cap and mid-cap funds. Because of this, some experts advise not to invest all your investment money in small cap funds but rather to invest a portion of it.
Should I Invest in a Small Cap Fund?
Small cap mutual funds are one of the riskiest financial instruments in the market. The unpredictability of small cap enterprises drives the basis of any small cap mutual fund.
These are ideal for investors willing to take high risk with a probability of gaining high returns.
Before making investment decisions, investors must also determine their investment goals, the length of time they want to remain invested before reaping the benefits, and their risk profiles.
Small Cap Funds: FAQs
Aggressive investors with short-term goals may consider investing in a small cap fund.
Market volatility is a significant risk associated with mutual fund investing. Most equities funds will endure a slump while the industry is in the gloom.
When it comes to an open-ended mutual fund, it functions without limitations. On the other hand, the closed-ended funds have a limited initial offer size.