What are Small Cap Mutual Funds?
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Small-Cap Funds are Mutual Fund schemes that invest at least 65% of their total assets in equity and equity-related securities of small-cap companies. Small cap companies are generally with a market capitalization of under Rs 100 crore, falling outside the top 250 companies by market capitalization, although their definition may vary among market intermediaries.
Characteristics of Small-Cap Mutual Funds
• Invests in small-cap companies with high growth potential.
• Volatile and risky due to early development stage of the underlying companies.
• May outperform mid- and large-cap funds in a bull market, underperform in a bear market.
Why Invest in Small-Cap Mutual Funds?
• Significant Growth Potential: Investments in developing businesses with strong growth and diversification possibilities.
• Undervalued Assets: Due to underestimation, investing in small businesses at lower costs may yield long-term returns as they grow.
• Mergers and Acquisitions (M&A): Small enterprises offer significant M&A opportunities, potentially leading to benefits as they merge with larger companies.
If you're seeking to diversify your portfolio, embrace higher risks, and explore long-term financial opportunities, Small-Cap Mutual Funds may be a good fit. However, before investing, carefully assess your risk profile, the fund's investment approach, and historical data and consult your financial advisor before investing.
Disclaimer
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.