Mutual funds are of different types. Such as Bluechip Fund, Large Cap Fund, Pharma Fund, Mid Cap Fund, etc., but the category of mutual funds that have given returns of up to 220% in the last one year is a small cap mutual fund. What are small cap mutual funds …
Mutual funds make their baskets according to the capital of different companies and then invest in them. Companies with small or little capital are also known as ‘small capital’ companies. Hence small cap mutual funds invest in similar companies. How much is the average return of this category …
If we see the performance of small cap mutual funds, then their performance has been normal in the last 3 years. But in the past year, this category has consistently remained in the top. If you look at the average return of this category for the last one year, then it has generated a return of 120%. While some top performers have given up to 220% returns. Who is the top performer?
The best performance in the small cap mutual fund category last year was ‘Quant Small Cap Fund’, which gave a return of 217%. Whereas Kotak Small Cap Fund was the second best performer with 139% return. At present, there are 24 small-cap funds in the market, out of which 22 returns have been in the last one year. The minimum return of a fund in this category has been 96%.
Richa Aggarwal, senior research analyst at Equitymaster, says that small-cap funds reached their lowest levels in 2018, but after Kovid, there has been an increase in reinvestment. In such a situation, there has been a lot of change in the small-cap category since 2018 and now after Corona, companies which were weak and weakened and those which were stronger and stronger, this has increased the consolidation. The balance sheet of the companies has been cleaned and the problem of liquidity has also happened to some extent. Hence the performance of companies and mutual funds has improved in this category.
Should you invest in Small Cap Fund or not? In this regard, Richa Aggarwal says that the last time the index of small cap companies in the stock markets strengthened, it had climbed by 300%. While their climbing up and down varies from company to company. According to this, the small-cap category is likely to climb a little more now.
But Harshad Chetanwala, co-founder of MyWealthGrowth, says that investors should not be affected by this sudden return because there is a lot of risk with small cap and mid cap funds, as well as being very volatile nature .
Now the question arises in the mind of an investor whether he should invest in Small Cap or not and if yes, how should he do it. In this regard, Raghavendra Nath of Ladderup Wealth Management says that Small Cap Mutual Funds are for sure players who invest and understand the risks as well as market risks.
At the same time, Harshad Chetanwala says that good opportunities exist in the Small Cap or Mid Cap category. Despite this, an investor should invest only a small part of his total investment in it. When he starts understanding the risks associated with this market, he can increase his share of investment.
