To ensure no losses in small-cap MF bets, SIP for at least 12 years
small-cap mutual funds if they do Systematic Investment Plans (SIPs) in these schemes for at least 10 years.
According to a study by asset valuation analytics firm Valuemetrics Technologies on monthly rolling returns for SIPs between April 2005 and March 2025 in the Nifty Small Cap 250 Total Returns Index, such investments made for three to ten years have incurred losses (see table). For instance, the highest return made in a three-year SIP in the Nifty Small Cap 250 TRI in these 20 years is 42.1% on an annualised basis. At the same time, the value has eroded by as much as 64.70% in the worst-case scenario for three-year SIPs in this period, the study showed.
Similarly, investors lost 0.4% on an annualised basis in a 10-year SIP, but if the SIP continued for 12 years, the minimum return increased to 2.4%.
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«Investors randomly start SIPs in small cap funds, but it is important that they should know that they need to come with longer time horizons if they need to protect capital in this category,» said Chirag Patel, Co-Founder, Valuemetrics Technologies. «As investors extend their investment horizon, the impact of short-term volatility diminishes, increasing the probability of earning higher returns.»
In a declining market, selling in smaller shares tends to be the sharpest as they also offer the highest returns in an advancing market. Since September 24, when the Nifty Small cap 250 hit a peak, the index is