Can I invest in small cap funds? (2024)

FAQs

Can I invest in small cap funds? ›

You can invest in small-cap stocks by purchasing shares through your preferred brokerage or investment account. Keep in mind that there is less information available about small-cap companies (namely: analyst research) compared with their larger counterparts. Small-cap companies also face greater business uncertainty.

Are small-cap funds risk-free? No, small-cap funds pose a significant risk in short to medium term. However, if they are well-balanced in your investment portfolio, they can provide you with fruitful returns in due time. It is always advisable to research well before you start investing in small-cap funds.

Added to that, small-cap funds are good choices for investors with a high-risk appetite, as companies with small market capitalizations are expected to have higher growth potential than large- and mid-cap companies. Small-cap funds generally invest in companies having a market cap lower than $2 billion.

He might not buy small caps today. But he did back in 1972 when he bought See's Candies for just $25 million (equivalent to over $637.5 million today). The reason is relatively simple – growth is greatest in the early stages of a company's development.

Small-cap mutual funds perform well over a long period of time. However, over a short period of time, they tend to be very volatile. So if you plan on withdrawing/redeeming your money from the mutual fund early, you could suffer losses. Sure, you could also make gains, but there is always the risk.

If you want to start investing in mutual funds through sip you can start anytime even though as on today small cap stocks are kinda over valued. Just don't invest Lumpsum amount. Recently, Some AMC have stopped taking lumpsum money for their small cap funds as good small cap stocks are over bought right now.

Small cap equities are often viewed as a good barometer of regional economic health, and our expectation for 2024 is that they're likely to rebound when interest rates come down later in the year.

The small cap funds offered an average return of around 17.48% in a five year period. Small cap schemes are benchmarked against Nifty Smallcap 100 - TRI, Nifty Smallcap 250 - TRI, and S&P BSE 250 Small Cap - TRI.

Small Cap Mutual Funds: Up to 2. Given how high the risk is with these mutual funds, it is best to limit yourself to a limited number of small cap mutual funds. Also, avoid putting in a great percentage of your total mutual fund investment in small cap mutual funds. Debt Funds: Ideally 1, but 2 is also good.

Why not to invest in small-cap stocks? ›

The earnings of large-cap companies tends to be far less volatile than the earnings of the mid-cap or small-caps. The lower earnings and stock price volatility makes large-cap stocks and funds a good choice for investors seeking a less volatile/risky exposure to equities.

Over the past 11 recessions, small caps have beaten their larger cousins by over 16% during the 12 months after a recession started. Consider the periods before and after the dot-com crash.

This Is Their Real Test. Small stocks have popped in the past few days, outpacing the large-cap S&P 500.

Large-cap funds are less risky than small and mid-cap funds. Small and mid-cap funds have higher growth potential than large-cap funds. Large-cap funds are good for conservative investors. Mid and small-cap funds are suitable for medium-risk takers to aggressive investors.

Fund Size: The HDFC NIFTY Smallcap 250 ETF currently holds Assets under Management worth of Rs 244.08 crore as on Mar 31, 2024. 4. Expense ratio: The expense ratio of the fund is 0.2% for Regular plan as on Mar 31, 2024.

Small-cap stocks and large-cap stocks both come with their own pros and cons. While small-cap stocks can generate higher returns, they also have a higher risk profile. Conversely, large-cap stocks witness smaller growth but are more stable. Investors should consider investing in both for a balanced portfolio.

Are small-cap ETFs a good investment? Investing in small-cap ETFs can provide attractive returns as long as they're purchased at sensible prices, but there are some drawbacks to be aware of. Small-cap ETFs allow you to purchase a diversified portfolio of smaller companies for a relatively low cost.

Mid Cap Mutual Funds: Up to 2. While you might get higher returns, the risk you expose yourself to is also higher. Small Cap Mutual Funds: Up to 2. Given how high the risk is with these mutual funds, it is best to limit yourself to a limited number of small cap mutual funds.