Investing in mutual funds is one of the most popular ways to grow wealth over time. Mutual funds allow investors to diversify their investments across a range of assets, which helps to reduce risk and potentially increase returns. Small-cap mutual funds, in particular, can be a great way to invest in promising new companies that have the potential for growth. In this blog, we will discuss the best small-cap mutual funds in India.
What are Small-Cap Mutual Funds?
Small-cap mutual funds are funds that invest primarily in companies with small market capitalization, i.e., companies with a market capitalization of less than Rs. 500 crore. These companies are generally new and have a lot of potential for growth. However, they are also more volatile than larger companies, which means that there is a higher degree of risk associated with investing in small-cap mutual funds.
Advantages of Investing in Small-Cap Mutual Funds
Investing in small-cap mutual funds has several advantages, including:
- High Potential for Growth: Small-cap companies have the potential for rapid growth, which can result in higher returns for investors.
- Diversification: Small-cap mutual funds invest in a range of companies, which helps to diversify your investment portfolio and reduce risk.
- Long-Term Investment: Small-cap mutual funds are best suited for long-term investment, as these companies take time to mature and realize their potential.
Top Small-Cap Mutual Funds in India
Here are some of the top small-cap mutual funds in India:
a. SBI Small Cap Fund
The SBI Small Cap Fund is a top-performing small-cap mutual fund in India. The fund has generated an annualized return of 18.79% over the last five years. The fund has a high allocation to small-cap companies and has a diversified portfolio across sectors.
b. HDFC Small Cap Fund
The HDFC Small Cap Fund is another top-performing small-cap mutual fund in India. The fund has generated an annualized return of 20.12% over the last five years. The fund has a diversified portfolio across sectors and invests in companies with strong growth potential.
c. Axis Small Cap Fund
The Axis Small Cap Fund is a relatively new small-cap mutual fund in India. The fund has generated an annualized return of 25.46% over the last three years. The fund has a high allocation to small-cap companies and has a diversified portfolio across sectors.
d. Kotak Small Cap Fund
The Kotak Small Cap Fund is a well-diversified small-cap mutual fund in India. The fund has generated an annualized return of 19.38% over the last five years. The fund invests in companies with strong growth potential and has a diversified portfolio across sectors.
e. Franklin India Smaller Companies Fund
The Franklin India Smaller Companies Fund is a top-performing small-cap mutual fund in India. The fund has generated an annualized return of 20.51% over the last five years. The fund has a high allocation to small-cap companies and has a diversified portfolio across sectors.
Conclusion
Investing in small-cap mutual funds can be a great way to grow your wealth over time. However, it is important to understand the risks associated with investing in small-cap companies. It is always a good idea to do your research and consult with a financial advisor before investing in any mutual fund. The above-mentioned small-cap mutual funds are some of the top-performing funds in India and can be a good option for investors looking to diversify their portfolio and invest in high-growth potential companies.
Read more useful content:
Frequently Asked Questions (FAQs)
- What is a mutual fund?
A mutual fund is a type of investment vehicle that pools money from multiple investors to purchase securities such as stocks, bonds, and other assets. The fund is managed by a professional fund manager who invests the pooled money in a diversified portfolio of securities.
- How does a mutual fund work?
When you invest in a mutual fund, you buy units of the fund. The value of each unit is calculated based on the total value of the assets held by the fund. As the fund invests in a diversified portfolio of securities, the value of your investment can fluctuate based on the performance of the underlying securities.
- What are the benefits of investing in mutual funds?
Investing in mutual funds has several benefits, including diversification, professional management, and liquidity. Mutual funds allow investors to invest in a diversified portfolio of securities, which helps to reduce risk. The fund is managed by a professional fund manager who has expertise in selecting the right securities to invest in. Mutual funds are also liquid, which means that you can easily buy and sell your units at any time.
- What are the different types of mutual funds?
There are several types of mutual funds, including equity funds, debt funds, balanced funds, index funds, and sectoral funds. Equity funds invest primarily in stocks, debt funds invest in fixed-income securities such as bonds, balanced funds invest in both stocks and bonds, index funds track the performance of a specific index, and sectoral funds invest in specific sectors such as technology, healthcare, or energy.
- What are small-cap mutual funds?
Small-cap mutual funds invest primarily in companies with small market capitalization, i.e., companies with a market capitalization of less than Rs. 500 crore. These companies are generally new and have a lot of potential for growth. However, they are also more volatile than larger companies, which means that there is a higher degree of risk associated with investing in small-cap mutual funds.
- How do I choose the right mutual fund to invest in?
Choosing the right mutual fund depends on several factors, including your investment goals, risk tolerance, and investment horizon. You should consider factors such as the fund’s past performance, expense ratio, asset allocation, and fund manager’s track record before making an investment decision. It is always a good idea to consult with a financial advisor before investing in any mutual fund.
