In the investment world, all of us look for investment opportunities where the risk is manageable and the returns are better than expected. In recent years, Top Small Cap Mutual Funds have gained popularity among investors due to the immense growth potential of small companies. This is why selecting the right mutual fund can result in good returns in the long run.
What are small-cap funds and what makes them special?
Small-cap mutual funds are those that invest in companies that do not belong to the top 250 companies in terms of market capitalization. As per SEBI guidelines, small-cap mutual funds are required to invest at least 65 percent of their total assets in small-cap stocks.
This implies that there is a slightly higher risk associated with such mutual funds, but investing with the right timing and patience can result in better returns.
How was the process of selecting the funds carried out?
The selection of these funds was done on the basis of the most recent available information, with the five-year CAGR rate being the key criterion. The information used for comparison was derived from mutual fund screeners to give a fair representation of the performance.
Performance of the Quant Small Cap Fund
The Quant Small Cap Fund has shown exemplary performance over the last five years, with a CAGR of over 26%. The NAV of the fund, its size, and the low expense ratio have made it a favorite among investors. The fund’s portfolio is largely invested in equities, thereby enhancing its long-term growth prospects.
The benchmark for this fund is NIFTY Smallcap 250 TRI, and it is handled by a professional fund manager. The portfolio of this fund also comprises investments in some large companies. Therefore, it is less risky. On the basis of its performance over the last three and five years, this fund has been able to provide excellent returns to its investors.
What’s important to understand before investing
Small-cap funds are always more risky because the performance of small companies can be more influenced by market conditions. Therefore, it is always important to have a long-term investment horizon and know your risk tolerance before investing in small-cap funds.
Small-cap mutual funds can be a good choice for those investors who want to increase their wealth in the long run and are capable of handling market fluctuations. The secret to success lies in choosing the right fund, regular investing, and patience.
FAQs: Small Cap Mutual Funds
Q1. What are small-cap mutual funds?
They invest mainly in stocks of smaller companies with high growth potential.
Q2. Are small-cap funds risky investments?
Yes, they carry higher volatility but may offer higher long-term returns.
Q3. How long should one invest in small-cap funds?
A minimum investment horizon of five to seven years is advisable.
Q4. What does CAGR mean in mutual fund returns?
CAGR shows the annual growth rate of an investment over time.
Q5. Should beginners invest in small-cap funds?
Beginners should invest cautiously and diversify their portfolio first.
Disclaimer: This article is meant for educational purposes only. There are risks involved in mutual fund investments. Please consult your financial advisor before investing.
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