Best Small-Cap Mutual Funds to Invest in 2024

Best Small-Cap Mutual Funds: Investments in small-cap companies with a market value of less than Rs. 5,000 crores -are made by small-cap mutual funds. These are the funds that invest almost entirely in small-cap companies and very little in higher market categories. They are recognized to be significantly riskier in contrast, although they do tend to beat large or mid-cap funds.

You can check out some of the top small-cap mutual funds to invest in 2024 to gain a better understanding of small-cap mutual funds.

List of Small Cap Mutual Funds in India

Best Small-Cap Mutual Funds to Invest in 2024
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The list of the Best 15 Small Cap Mutual Funds in India in 2024 is given in the image shown below.

Who Has to Invest in Small Caps Mutual Funds?

Consider the following when looking for the top small-cap mutual funds of 2024: This strategy works well for those who are already in the market and are seeking additional ways to diversify their holdings. It makes sure that your investments are diversified throughout a variety of other investment types and not just small-cap funds, since small-cap funds can be hazardous by nature.

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Because these funds invest in smaller firm equities that have not yet experienced growth, they have a significantly higher risk than mid-cap or large-cap funds. As a result, it may be appropriate for investors who can withstand rapid drops in the fund’s value or who are prepared to assume some risk.

While small-cap funds are noted for their strong long-term performance, they are susceptible to sharp short-term volatility. Because of this, they are the best candidates to be long-term investors in the funds.

Things to Consider Before Buying Small-Cap Mutual Funds

Before starting to invest in top small-cap funds, take into account the following factors:

Risk factor: Compared to mid- or large-cap mutual funds, small-cap mutual funds are far more volatile. Furthermore, there is a wide range of fluctuations in the net asset value of small-cap mutual funds.

Investor expertise: When combined with sound strategy and close observation, small-cap mutual funds can produce excellent returns. These funds are known to be extremely volatile, nevertheless. As a result, investors with solid mutual fund investing experience should consider it.

Investment Term: Investors with a long investment horizon are best suited for these mutual fund kinds. For the most part, investors with short investment horizons should avoid it.

Major Advantages to Invest in Small-Cap Mutual Funds

The following are several advantages of purchasing the top small-cap mutual funds:

  • These funds have a very high growth potential. The reason for this is that small-cap firms’ aggressive expansion strategies can greatly accelerate their growth, particularly in the long run.
  • Small-cap mutual funds may be a good addition to your portfolio if large-cap and mid-cap funds aren’t performing up to expectations. These typically yield higher returns, balancing your portfolio.
  • Typically, they invest in stocks of businesses that have enormous profit potential. Fund managers analyze the best-performing stocks through in-depth research and make appropriate investments. It enables portfolio diversification for investors while allowing for moderate risk.

Investing route: Systematic Investment Plans (SIPs) and lump sum contributions are the two ways in which investors can distribute their savings to small-cap funds.  Those who choose the first choice have the option of investing the entire sum at once. However, kindly be advised that in this instance, a minimum investment of Rs. 1,000 may be required. On the other hand, SIP enables investors to set aside money for a mutual fund plan regularly (monthly, quarterly, etc.). In this case, the installment payment can be as little as Rs. 100.

Risks Associated with Small Cap Mutual Fund Investing

Consider the following main concerns while locating the top small-cap funds:

High Volatility: The potential for sharp price swings is one of the main hazards associated with small-cap funds. Because of this, investing in them is very risky because you could lose a lot of money if the price moves against your expectations.

Risky Performance: A variety of factors, such as stock performance and selection, as well as prompt fund manager action to maintain fund balance, influence the performance of small-cap funds. Given the multitude of factors involved, the performance of small-cap funds might not be as noteworthy as one might imagine.

Low Liquidity: Institutional investors seldom make investments in small-cap mutual funds. However, engagement is usually poor, even among retail investors. This may lead to issues with liquidity and complicate the process of purchasing or disposing of units on the market.

Best Small Cap Mutual Funds in 2024 FAQ

Q. Are small-cap mutual funds good for new investors?

Ans. Small-cap mutual funds are known to have sudden highs and provide rewarding returns. But, they are also known to be extremely volatile, especially when compared to mid-cap and large-cap funds. Therefore, investors with more expertise can consider investing in these funds.

Q. What type of returns can be earned from small-cap mutual funds?

Ans. Small Cap Mutual Funds deliver stable returns in the long run because, in the short span of duration, they may encounter market fluctuation, resulting in volatile results.

Q. Is it risky to invest in small-cap mutual funds?

Ans. It is risky and volatile to invest in small-cap mutual funds in the short term, it is when they could encounter major fluctuations. Apart from that, small-cap funds can give you rewarding returns in the long run.

Q. Are small-cap mutual funds suitable for short-term investment?

Ans. Small-cap mutual funds are known to give you high returns in the long term and perform well over some time.

Q. Who are small-cap mutual funds most suitable for?

Ans. Small-cap funds can be the most suitable for investors with expertise in mutual fund investments.

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

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