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Smallcap Mutual Fund Schemes
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A Smallcap-oriented Mutual Fund Scheme is an Equity Mutual Fund scheme that is suitable for long term investors.
These schemes have high volatility and carries a high degree of risk.
However, they also give higher returns over long time frames.
Hence, these schemes are ideal for investors who can SIP / Invest with a minimum of 8+ years.
These schemes can be used to meet long term financial commitments such as:
- Buying / Building a house
- Kids higher / foreign education needs
- Retirement Corpus building etc.
In the short run, these schemes are very risky to invest and at times might even give huge negative returns.
Many investors in the past might have experienced even -25% to -35% returns for brief periods as well.
Hence, only high risk taking investors with extreme long term goals should use these schemes.
Contents
Strategy
An ideal strategy to always invest in SIP mode in this category of schemes so as to take advantage of volatility of the equity markets.
Once the corpus / financial goal amount is reached, it is better to lock the growth by moving to safer asset classes such as Largecap Mutual Fund Schemes, Diversified Multicap Equity Funds or even to Debt Mutual Funds to lock the growth.
Examples of Smallcap Mutual Fund Schemes
- Reliance Small Cap Fund
- L&T Emerging Businesses Fund
- HDFC Small Cap Fund
- SBI Small Cap Fund
- DSP Smallcap Fund
Reliance Small Cap Fund vs SBI Small & Midcap Fund
- Both the schemes are categoized as Smallcap funds.
- I prefer Reliance Small Cap over SBI Small & Midcap Fund considering the following, amongst other factors
- Expense Ratio: Reliance Small Cap is at 1.23% vs SBI Small & Midcap Fund's 1.33
- Net Assets: Reliance Small Cap is at 2875 cr vs SBI Small & Midcap Fund's 642
- 1-year Returns: Reliance Small Cap is at 42.02% cr vs SBI Small & Midcap Fund's 32.03%
- 3-year Returns: Reliance Small Cap is at 41.16% cr vs SBI Small & Midcap Fund's 43.54%
- Further, at the time of this writing (October 2017), SBI Small & Midcap Fund is no longer accepting fresh subscriptions
Related Topics
- Balanced Funds
- Diversified Multicap Equity Funds
- Equity Linked Savings Schemes (ELSS)
- Equity Savings Mutual Funds
- Arbitrage Mutual Fund Schemes
- Exchange Traded Funds
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