Small cap funds are an excellent way to expand your wealth. But before you invest in small cap mutual funds you should understand what they are, their risk profile, how you can weather the risks and the best small cap funds are for the financial year 2018-2019.
What is a small cap mutual fund?
The market value of a company depends on the worth of its shares that are owned by shareholders. The stocks of publicly traded companies whose market evaluation is less than INR 500 crores are categorized under small-cap.
When a fledgeling company tries to expand aggressively, it becomes vulnerable to market fluctuations. This makes small cap mutual funds a somewhat risky investment. But they also have the highest potential for growth and promise for rich dividends.
The size of the company also has a bearing on the opportunities and risks associated with the stocks of a company. Small cap mutual funds invest about 80% of the corpus in relatively small and new companies.
Who should invest in small cap mutual funds?
If you are an investor who is not averse to moderate or high risks, you can diversify your portfolio by investing 15-20% in small cap funds for a duration of 7-15 years. Since small cap mutual funds are very volatile, you should invest for at least 7 years to cost average the highs and lows of market fluctuation.
Best small cap funds of 2018 that you can invest in are –
Reliance small cap fund
In the last 5 years, it has yielded 36% annualized returns. Its asset size presently is INR 6910 crore. It was launched on 16th September 2010. Minimum investment amount is INR 5000.
Birla SL Frontline Equity Fund
This small cap fund has produced 25% annualized returns in the last 5 years. It was launched on 30th August 2002. Its current asset size is INR 11,877.82 crores. The minimum investment is INR 5000.
ICICI Prudential Value Discovery Fund
23% annualized returns in the last 5 years. It was launched on 4th March 2004. Its asset size is INR14, 011.22. The minimum investment is INR 500.
HDFC Small cap fund
This scheme has yielded 25% annualized returns in the last 5 years. It was launched on 7th May 2007. Its current asset size is INR 12,753.08 crore. Your minimum investment has to be INR 5000.
Axis Long Term Equity Fund
Its annualized returns over the last 5 years have been 24.50%. It was launched on 21st December 2009. Its asset size is INR 10,675.84 crores. The minimum investment amount is INR 500.
DSP Micro Cap Fund
It produced an annualized return of 32.80% in the last 5 years. It was launched on 4th May 2007. Its asset size is INR 4258.52 crores. The minimum amount that you have to invest is INR 5000.
Small cap mutual funds are very volatile. But if you invest in the right small cap mutual funds and stay invested for a long stretch of time, they are likely to yield high returns. You can use an online investment app for the same.
mutual fund investment app 