Best Small Cap Mutual Funds to Invest in India

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Best Small Cap Mutual Funds

Small-cap funds are equity-oriented schemes offered by mutual fund houses. The small-cap funds predominantly invest a major portion of their assets in small-cap companies. 

Small-cap companies are the companies that rank from 251st company onwards in terms of full market capitalization. These funds invest a minimum of 65 per cent of their total assets in equity and equity-related instruments. Small-cap funds can deliver very high returns, which evidently come with inherently higher risk. The benefit of investing in small-cap funds is that you invest well in advance in companies that can become top businesses in future.

Below are some of the top small cap funds.

Best Equity MF (Small-Cap)

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Here is the list of best equity MF in last one year

What you should know before investing:

An investor should have an investment horizon of at least 5 years in order to get optimal returns from a small-cap fund. This is because equity markets are quite volatile in the short term and, therefore, an investor with long investment horizon should consider investing in such a fund.
Small-cap funds come under the high-risk category as these funds invest a major portion of their assets in equity and equity-related instruments. Investors with higher risk appetite can consider investing in these funds as these are very much volatile in nature. Any change in the market conditions affects small-cap companies the most and, therefore, the small-cap funds also get affected.
These funds offer diversification to the investors by investing in small-cap companies across various sectors that are under-researched but have great potential for the future. Therefore, small-cap funds have the capability to deliver much higher returns than mid-cap and large-cap funds.