Which small-cap fund gives highest return?
The schemes top performing small cap mutual fund schemes include Mahindra Manulife Small Cap Fund, Bandhan Small Cap Fund and Franklin India Smaller Companies Fund.
The schemes top performing small cap mutual fund schemes include Mahindra Manulife Small Cap Fund, Bandhan Small Cap Fund and Franklin India Smaller Companies Fund.
Tata Small Cap Fund Direct Growth
Fund Performance: The Tata Small Cap Fund has given 34.51% annualized returns in the past three years and 30.47% in the last 5 years. The Tata Small Cap Fund comes under the Equity category of Tata Mutual Funds.
The highest delivering small cap mutual fund in 2023 was Mahindra Manulife Small Cap Fund, which offered over 53 per cent annual return last year, according to data available on Association of Mutual Funds in India (AMFI).
Nippon India Small Cap Fund offered the highest return in the three year and 10 year horizons. SBI Small Cap Fund offered the highest return in the five and seven year horizons.
We expect earnings to drive the next leg higher for small caps. According to FTSE Russell, analysts anticipate that expected earnings growth among companies in the Russell 2000 will rebound by 28.2% in 2024, after an expected decline of 11.2% in 2023. The timing depends somewhat on the ultimate path of the US economy.
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.
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.
The recommended time frame is eight to ten years. Making these funds highly suitable for long-term investors. Small Cap Funds offer great potential to earn benchmark-beating returns. These are highly risky investments and should be considered when you can stomach the price volatility.
What were the top-performing funds? Top of the list by some margin was the JP Morgan Emerging Europe, Middle East & Africa investment trust, with a one-year return of almost 50%. The Amundi Semiconductor ETF comfortably took second place with a one-year return of 43%, well ahead of the iShares Poland ETF at 35%.
Why small-cap funds give more returns?
Small Cap Funds invest in all companies except the top 250 in terms of market capitalization. Though these funds are relatively riskier and volatile in the short to medium term than other equity-oriented funds, they promise a higher upside of return in the long term.
Small cap stocks are riskier compared to the mid-caps and the large caps and their price movements can be quite volatile. Small caps typically outperform large cap funds over a longer period of time due to stocks in their portfolio having a higher growth potential.
Small caps can be great wealth creators over the longer term, but they can potentially witness large drawdowns over the short term. Small-cap funds are on the verge of completing another calendar year of 30%+ returns. These are extraordinary returns. So it's a good time to remember that returns can also be cyclic.
They are suitable for high-risk investors, so keep that in mind before you invest in them. Apart from this, research some more, pay attention to the fund manager's expertise, the fund's expense ratio, asset allocation and portfolio composition, etc., and select funds that best match your preferences.
In an analysis of foreign and U.S. investments from December 1998 through June 2023, researchers at index provider MSCI found that small-cap stocks outperformed large firms over 15-year periods about 9 in 10 times.
Not only have small-cap stocks historically outperformed their larger peers, but they've done so strongly, by an annual average of more than 300 basis points (bps), and consistently, more than 69% of the time (Figure 1).
The small cap segment can be extremely volatile in the short term, but they have the potential to offer very high returns over a long period. Small cap schemes are recommended only to aggressive investors with a high-risk appetite and long investment horizon, say, around seven to 10 years.
How much of a portfolio should be in small caps? An average investor may generally want to allocate 20% of their investment portfolio in small caps. This would depend on your risk tolerance, time horizon and goals as an investor. High risk investors may consider a portfolio of 50% in small caps.
Move that money to mid-cap and large-cap in a methodical way and do it on a month-on-month basis," said Dhirendra Kumar of Value Research. But if small-caps are just 20-30 per cent of your portfolio, and you are investing for long, say 10 years, you need not sell your small caps.
Cash and cash equivalents can provide liquidity, portfolio stability and emergency funds. Cash equivalent vehicles include savings, checking and money market accounts, and short-term investments. A general rule of thumb is that cash and cash equivalents should comprise between 2% and 10% of your portfolio.
Are small-cap funds good for retirement?
Small Cap Stocks Outperform Large Cap Stocks, Historically. All great companies once started out small, therefore they can grow in ways that are simply impossible for large companies.
Investors like small caps because they can offer higher potential returns than large-cap stocks, which are typically represented by the S&P 500 index. However, because they're smaller and have fewer financial resources, they're often riskier and more volatile, too.
Smaller companies tend to issue more floating-rate debt than their larger peers: Their loan payments fluctuate with benchmark interest rates, so higher interest expenses are denting their bottom line. And even if interest rates have peaked, small caps likely won't see any relief until rate cuts.
Small cap schemes are recommended only to aggressive investors with a very high risk appetite and very long investment horizon. However, if you don't have the stomach for huge risk, you should stick to schemes that are relatively safe.
Dan Boardman-Weston of BRI Wealth Management said the following funds should make suitable building blocks for a first-timer's portfolio: Liontrust Special Situations, HSBC FTSE All World Index, Gravis UK Listed Property, Polar Capital Global Technology and iShares Emerging Markets Equity Index.
