It is a type of equity mutual fund inventing scheme, when an investor wants to invest in equity mutual funds, investor should check on the market capitalization of the company. The market capitalization status of the company will give a clear picture of the investing benefits and its associated risks. There are different types of equity investing schemes available in the market, they are classified based on their respective market capitalization like Large-Cap, Mid-Cap and Small-Cap Mutual Funds. In this article we will explore about the Small Cap Mutual Funds, its features, benefits, and important aspects of this scheme. But when it comes to investing in the equity mutual funds investor wants to know about the return benefits and the risks about the scheme, well! it is very simple to know it with a simple trick, just multiply the present share price with the total number of outstanding shares, this trick will help you know about the benefits and the risks.
List of Top Small Cap Funds in India:
• Axis Small Cap Fund
• Kotak Small Cap Fund
• SBI Small Cap Fund
• Nippon India Small Cap Fund
• Canara Robeco Small Cap Fund
• Edelweiss Small Cap Fund
• ICICI Prudential Small Cap Fund
• HDFC Small Cap Fund
• UNION Small Cap Fund
• DSP Small Cap Fund
what is meant by Small-Cap Mutual Funds?
Small Cap Mutual funds are the equity funds, these schemes are operated by the Small companies, whose market capitalization is comparatively less than Large Cap and Mid Cap companies. The Security and Exchange Board of India (SEBI) has ranked the Small Cap Companies below 250 rank under terms of market capitalization, as these companies must invest at least of their 80% of their total assets. In general, these are the companies with less than Rs 500 crores of market capitalization. Small Cap Mutual Funds are mostly suitable for those who have higher risk tolerance, as these are the small companies that will be productive when they grow, but on counter if it does not grow it will hit hard, even a minor effect will cause a major risk, but these companies offer amazing returns and has maximum scope towards growth, however these schemes come with high risks, investor has it think about it. When it comes to these funds. investors look for short-term investments as they have higher risks levels in those schemes, but it would be recommended for higher risk tolerance and long- term investors.
Who Should Invest in Small Cap Funds?
• Investor who is higher risk tolerance
• Should have Patience.
• For long-term investors
• For those who wants higher returns
what is the Risk and Returns of Small Cap Funds?
Risks -
• Net Asset Value (NAV) is very sensitive Hence it has higher risks of loses in relation with the market condition.
• They deduct Capital Gains Tax when you gain returns.
Rewards -
• Offer Higher rewards
• It offers low expense ratio and does not eat away much from your returns.
Bottom Line:
Small Cap Funds are recommended for the long-term investors and who can tolerate higher risk but not for the short-term investors, and not better the risk averse investors. As in Short-Term, returns profited will be minimum and apart form that the addition of Capital gains tax charged, that will not offer you the fruitful gains.