I want to invest for more than 20 years. Which is the best small cap mutual fund to invest?Asked
Small cap funds invest in small companies in terms of market size and capitalization, but have the potential to provide high returns.
Choosing the best fund shall shall vary from individual to individual. Here are a few recommended small cap funds-
An investor must understand that small cap funds have both high risks and high returns, and an investor should mix this Balanced, large cap or debt funds, to mitigate the risks. Investment should be based on the investment duration and expected returns of the investors.
Small cap mutual funds are essentially mutual fund schemes that invest in companies that have small market capitalization but high growth potential. Though these funds are on the higher end of the risk continuum, the investors are generally compensated with higher returns as well. Needless to say, there is greater reliance placed on the fund manager's expertise to identify small companies with huge growth potential.
At Groww, we have many schemes that are dedicated to investing in small cap companies to suit the objectives of long term investors seeking high returns. Reliance Small Cap Fund - Growth and L&T Emerging Businesses Fund - Regular - Growth are two of the best small cap funds available.
Reliance Small Cap Fund is a fund dedicated towards generating long term capital appreciation and consistent returns by investing predominantly in equity and equity related instruments of small cap companies. The fund has consistently beaten its benchmark, S&P BSE Small Cap, in terms of 3 year and 5 year returns. The fund's annualized 5 year return is 32.80% whereas that of its benchmark is 18.51%. If you commit a sum of ₹5000 only each month for even 5 years, at historic rate of return it would increase your corpus to ₹6,54,313. Like investment in all small cap funds, the ideal duration for investment is long term, i.e., for a period of at least 5 years and the risk exposure to the investor is high.
L&T Emerging Businesses Fund - Regular - Growth is another of Groww's top performing funds. The returns provided by the fund are higher than its benchmark, and the risk is also lower. This fund balances investment between small cap and mid cap companies, with only a very small fraction of the corpus being allocated towards large cap companies. An investment of ₹5000 each month for three years would increase your corpus to ₹2,56,920 at historic rates.
Please note that historic rates of return are only indicative of, and do not guarantee, future performance. You can contact Groww to discuss a plan that best meets your needs.
While deciding on which mutual fund to choose you can look at the fund managers performance especially during market downturns.
Some of the best small cap funds you can look at are:
These funds have shown good performance in the past. There is always high risk when investing in small cap funds, so one needs to always stay vigilant of the market risks.
Small cap funds invest in companies that are very small but have potential to favour attractive returns. It also invests in companies that have smaller market capital.
Some of the best small cap funds for long term are: