I am looking to start is reliance small-cap fund. Is it a good fund? Any other better alternative?Asked
Reliance Small Cap Fund is a portfolio suited to investors who are looking to park their money for long term with growth objective.
Historically, the fund has outperformed its benchmark over a period of 3 years and 5 years. Though the fund ranks on the upper side of the risk continuum, its returns have been commensurate to it. The 3 year annualized rate of return is 24.35%, which exceeds the 15.96% p.a return generated by its benchmark, S&P BSE Small Cap over the same tenure.
For example, a monthly investment of ₹5000 in this fund for five years would increase the value of your corpus to ₹6,55,359. This amount is calculated at historic rate of return and in no way guarantees the performance of the fund.
The fund is equity oriented, meaning that a large proportion of the total corpus is invested in the stock market across sectors like Industrial Manufacturing, Textiles, Financial Services, Telecom, etc., with only a small proportion being held in cash. The equity investment is further diversified across a large number of mid cap and small cap companies, though some part is also invested in large cap companies. This contributes to the riskiness of the fund.
The tax implication of investing in the fund is akin to investing in equity funds, i.e., if the units are sold within a period of one year, tax at the rate of 15% p.a. will be levied. However, if sold after one year, the capital gain is exempt from tax.
The fund is ideal for your investment if your long term investment objective is to benefit from capital appreciation and you are comfortable with taking relatively higher degree of risk. You can check out the characteristics and past performance of the fund in detail here.
You can also evaluate other small cap funds suitable for long term investment here.
Reliance Small Cap Fund is a small cap fund which is one of the most popular small cap fund in market today.
In small cap funds, a large portion of investment is done in companies with small market capitalization i.e. having a market cap of less than INR 500 crore.
Key points for Reliance Small Cap Fund is:
Small cap funds are highly risky and volatile investment instruments as compared to large and mid-cap fund category due to their exposure in high performing equities. These funds have exponential growth potential and give high returns on investment and is best suited for investors with high risk appetite or for seasoned investors.
So, for 10-year investment horizon (long term horizon), investing in small cap fund like Reliance small cap fund will be fruitful and helps you to achieve your investment goal.
If you are an experienced investor and have a sound knowledge of investment in mutual funds then go ahead for Reliance small cap fund for small investment amount, keeping both advantages and disadvantages of small cap funds in mind. But if you are a beginner to investment in mutual funds, especially in equity mutual fund, thinking of the small mutual funds may not be the best idea for you.
Some other examples of popular small-Cap Funds for 2017:
The investment objective of Reliance small cap fund is to generate long term capital appreciation by investing predominantly in equity and equity related instruments small cap companies. Main characteristics of the fund are:
· Type- Open ended
· Risk- Above average
· Return sinch launch- 23.02%
· Minimum investment- Rs.5000
· Minimum SIP investment- Rs.100
· Turnover- 72%
· Exit load- 1% redemption within 365 days
The fund has a record of beating its benchmark, S&P BSE Small Cap, since its inception. Therefore, it is a good fund to invest in.
As the name suggests, Reliance Small Cap Fund is a small cap fund where majority of the investment is made in small cap.
This fund is very aggressive and is suitable for investors looking to take risk. Investment in this fund should be made for a long duration i.e investment should be made for more than 3 years.
Following are the key features of this fund:
· More than 90% investment is made in equity and a minor part is kept as cash for liquidity purpose
· Approx 50% invested in small cap stocks, followed by 40% in mid cap and remaining in large cap stocks.
· It has diversified its investment in various sectors with majority in consumer goods, Industrial Manufacturing and Financial Services
· 3 year and 5 year returns are higher than the benchmark, which shows that its good for long term investment
· 1 year return is lower than benchmark, which shows that investors should not invest in this fund for a shorter duration.
· Risk is higher compared to the benchmark
· Expense ratio is 2.01%
· Exit Load of 1% is applicable, if redeemed within 1 year
Few of the top holdings of this fund are:
1. RBL Bank Ltd
2. Navin Fluorine International Ltd
3. VIP Industries Ltd
4. United Breweries Ltd
Past performance shows that the fund has been performing really well. Also the fund manager is making right choices of stocks to invest in. This fund is recommended for investment with a long term horizon provided the investor is ready to take risk.
Small cap funds are highly risky and volatile investment instruments as compared to large and mid-cap fund category due to their exposure in high performing equities. These funds have an objective of seeking capital appreciation through investment in high growth stocks.
One can invest in this fund with a minimum SIP amount of ₹100. Fund is over 7 years old which gives it good reputation. Risks for this fund are higher as compared to the benchmark, however the 3 year and 5 year returns are also higher as compared to the benchmark.
Risk Level - HIGH
Minimum SIP Amount - ₹100
1 Year Returns - 55.16%
3 Year Returns - 25.37%
5 Year Returns - 33.19%
Being a reputed fund with above- average returns in the long run, this fund can certainly fall among investment grade.
You may consider other alternatives : here.