Is It a Good Time to Invest in Small Cap Funds Now?

financialexpress.com:

Small Cap Mutual Funds have been a sought-after sub-category of equity mutual funds, shows the AMFI data. One of the reasons for this is that Small Cap Funds have a good return potential, making them a worthwhile choice for long-term wealth creation. Small Cap Funds invest a minimum of 65% of their assets in Small Cap stocks.

On a YTD basis, mostly the Small Cap Mutual Fund category outperformed by generating average returns of 27.2% on the back of a good rally in the broader market. Meanwhile, the Mid Cap Mutual Fund category generated average returns of 23.5% and the Large Cap Mutual Fund category generated average returns of 12.2%.  (as of September 29, 2023)

Small-sized companies that prove their mettle even in the face of adversities have the potential to become big corporations in the future.

Small-caps hold the potential to outperform large-caps in the long run

Data as of September 29, 2023; Base taken as 10,000; (Source: ACE MF)

Past performance may or may not sustain in the future

As you may know, popular large-cap names of today, such as Bajaj Finance, Titan Company, Godrej Consumer Products, and Eicher Motors, among many others, were little-known small-cap stocks until around a decade ago. 

In fact, several such companies even today are steadily climbing their way up the leadership ladder and, on the way, to generate good returns for its investors.

Thus, investors looking to uncover the potential of these multi-baggers of tomorrow while they are still relatively undiscovered can consider investing in Small Cap Funds. 

Also Read: What is more tax-efficient for shareholders – Buyback or Dividends? 

The Nifty Smallcap 250 Index is currently near its all-time high levels with several stocks trading close to