Should You Invest In Small-Cap Mutual Funds?

Small-cap funds are one of the categories of equity mutual fund schemes for investors to create wealth.

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Ashish Navnitlal Shah Director, WealthFirst Portfolio Managers Ltd

A proportionate investment in such a scheme as part of one's overall portfolio can help boost your collective investment return, thereby aiding in reaching one's financial goals. However, investors need to be mindful of the risks associated with small-caps and be ready to get invested from a long-term perspective.

Understanding Small-Cap Category

Small-cap stocks are companies listed on the stock exchanges that are smaller in size when it comes to their market capitalisation (M-Cap). Typically, the M-Cap of these companies is not above ₹10,000 crore, while a majority are under the 5,000 crore mark. These companies are relatively much smaller in size and operations compared with the biggies of the market, but they have significant growth potential. Having said that, small-cap companies are not to be misunderstood as start-ups. In fact, many small-cap companies have well-established businesses and strong track records in their financial performance.

Benefiting from Small-Cap Investing