Small-cap funds are kinds of equity funds that capitalize on small companies in India. These are the companies with market capitalization under INR 5,000 Crores. Although these companies can provide wonderful returns, they are quite volatile. You can perceive losses in either the short or medium term. During the longer term, many best small cap mutual funds have provided great returns to their large-cap competitors. This implies that small-cap fund investors need patience to get those excellent results. Let’s first look at the reasons to invest in these funds and then explore the details of the best small cap mutual funds.
Reasons To Invest In Best Small Cap Mutual Funds
If you invest in small cap mutual funds, you target those companies having the potential for considerable growth in the future.
Small-cap companies are renowned for their agility and innovation. They can swiftly adapt to varying marketing conditions. Moreover, they can invest in new opportunities that lead to swift growth.
By investing in the best small cap mutual funds, you can diversify your investment portfolio. The corresponding diversification can help tackle the effect of any underperformance in a company or sector.
The small-cap investments might seem to be more volatile in the short term, but the best performing small cap mutual funds are capable of providing great returns over the long term.
Best Small Cap Mutual Funds
1) Quant Small Cap Direct Growth
Quant Mutual Fund is one of the best small cap mutual funds under the Equity Mutual Fund Scheme. It has allowed investors to access the program since 1996. The min. lump sum investment required is INR 1,000. The expense ratio is 0.64%. The percentage of return that you get for 1 year, 3 years, and 5 years are 67.44%, 150.38%, and 500.9% respectively.
2) Nippon India Small Cap Direct Growth
Nippon India Mutual Fund has launched an Equity Mutual Fund Scheme called Nippon India Small Cap Fund Direct-Growth. It is one of the best small cap mutual funds 2023. Investors can access to this plan since 1995. The expense ratio is 0.67% and the min. lump sum investment required is INR 100. The percentage of return that you get for 1 year, 3 years, and 5 years are 73.9%, 161.5%, and 251.4% respectively.
3) Bank of India Small Cap Direct Growth
The Bank of India Mutual Fund has launched the Bank of India Small Cap Fund Direct-Growth equity mutual fund scheme. It is one of the best small cap mutual funds to invest in 2022 and has allowed investors to access the plan since 2008.
The expense ratio is 0.61% and the min. lump sum investment required is INR 100. You get 52.02% return for 1 year, 118.18% for 3 years, and 350.07% for 5 years.
4) Canara Robeco Small Cap Direct Growth
Canara Robeco Mutual Fund has launched the Canara Robeco Small Cap Fund Direct Growth Equity Mutual Fund Scheme. In terms of return, it is one of the best small cap mutual funds to invest in 2023.
The expense ratio is 0.42% and the least lump sum investment is INR 1000. The percentage of return that you get for 1 year, 3 years, and 5 years are 43.41%, 117.98%, and 296.51% respectively.
5) Edelweiss Small Cap Direct Growth
Introduced by the Edelweiss Mutual Fund, it allowed investors to access its plan since 2008. It is one of the best small cap mutual funds value research.
The expense ratio is 0.43% and the least lump sum investment required is INR 100. You get a 48.96% return for 1 year, 118.28% for 3 years, and 299.99% for 5 years.
6) Tata Small Cap Fund Direct Growth
Presented by Tata Mutual Fund, this small cap mutual fund scheme has been accessible since 1995. It boasts an expense ratio of 0.34% and you need to have at least INR 1000 as a lump sum investment. The returns provided for 1 year, 3 years, and 5 years are 46.95%, 131.36%, and 292.77% respectively.
7) Invesco India Smallcap Direct Growth
Invesco Mutual Fund has introduced this small cap mutual fund scheme. The expense ratio and minimum lump sum investment required are 0.46% and INR 500 respectively. The returns offered for 1 year, 3 years, and 5 years are 56.61%, 128.59%, and 279.8% respectively.
8) Kotak Small Cap Direct Growth
Introduced by Kotak Mahindra Mutual Fund, this scheme has been accessible since 1994. It is one of the best small cap mutual funds in India. The min. lump sum investment and expense ratio are respectively INR 100 and 0.46%. The offered returns for 1 year, 3 years, and 5 years are 43.9%, 98.99%, and 285.5% respectively.
9) ICICI Prudential Smallcap Direct Growth
Launched by ICICI Prudential Mutual Fund, this one is one of the best small cap mutual funds to invest in 2024. It comes with an expense ratio of 0.66% and the least lump sum investment to be made is INR 100. You get a 45.87% return for 1 year. The returns for 3 years and 5 years duration are charged at 161.5% and 262.1% respectively.
Conclusion
If you are looking for significant growth potential in your portfolio, you can invest in small cap mutual funds. The small-cap companies’ dynamic nature, India’s economic recovery, and technological development help provide substantial returns. Before choosing one of the best small and mid cap mutual funds, you must consider the risks associated with investments, market sensitivity, and the fund’s volatility. You can contact BeWealthy to get recommendations on small cap mutual funds investment.
FAQs
1. What is the typical investment duration in small cap mutual funds?
The small cap mutual funds are equity funds and they capitalize on the stocks of companies. In the best small cap mutual funds, you must stay invested for a minimum of 5 years.
2. Do small cap mutual funds come with high risk?
Small cap mutual funds usually invest in equities, so they can be volatile in the short term. But the risk can reduce considerably over a long term.
3. Is it recommended to invest in small cap mutual funds?
If you invest in small cap mutual funds, you gain exposure to small companies that can become mid and large-scale companies in the future. But small cap mutual funds can be very volatile in the short run, specifically if the market scenarios are not favorable. The returns can be market-competitive if you stay invested for a long period.
4. Where do Small Cap Mutual Funds invest?
Small cap mutual funds must invest in a minimum of 65% of stocks of companies, ranked 251 and higher in India, as per their market capitalization. The majority of funds in this category also allot to mid-caps, whereas some funds also had a very small percentage of large caps. Notwithstanding these allocations, these funds are small cap heavy. Hence, the risk-reward ratio is linked with small cap investment.