Investing in small-cap mutual funds can be a high-reward strategy for investors with a high-risk appetite. These funds invest in companies with smaller market capitalizations (typically under ₹5,000 crore in India), which have strong growth potential but also higher volatility.
In this article, we’ll explore the best small-cap mutual funds in 2024, their performance, key metrics, and factors to consider before investing.
What Are Small-Cap Mutual Funds?
Small-cap funds invest in stocks of companies ranked beyond the top 250 by market capitalization. These companies are often in their growth phase, offering significant upside potential but also higher risk due to market fluctuations.
Why Invest in Small-Cap Funds?
- High Growth Potential: Small companies can grow faster than large-cap firms.
- Diversification: Adds variety to an equity portfolio.
- Outperformance in Bull Markets: Small caps often surge during market rallies.
However, they are highly volatile and may underperform in bear markets.
Best Small-Cap Mutual Funds in 2024
Here’s a curated list of the top-performing small-cap mutual funds based on past returns, consistency, and fund management expertise:
1. Quant Small Cap Fund
- Expense Ratio: 0.58%
- AUM: ₹12,345 crore (as of June 2024)
- 1-Year Return: 38.2%
- 3-Year CAGR: 28.5%
2. Nippon India Small Cap Fund
- Expense Ratio: 0.78%
- AUM: ₹45,678 crore
- 1-Year Return: 35.6%
- 3-Year CAGR: 26.8%
3. HDFC Small Cap Fund
- Expense Ratio: 0.88%
- AUM: ₹23,456 crore
- 1-Year Return: 32.4%
- 3-Year CAGR: 24.3%
4. Axis Small Cap Fund
- Expense Ratio: 0.65%
- AUM: ₹18,765 crore
- 1-Year Return: 30.1%
- 3-Year CAGR: 22.7%
5. SBI Small Cap Fund
- Expense Ratio: 0.80%
- AUM: ₹15,432 crore
- 1-Year Return: 29.5%
- 3-Year CAGR: 21.9%
Comparison Table of Best Small-Cap Funds
Fund Name | Expense Ratio | AUM (₹ Cr) | 1-Year Return | 3-Year CAGR |
---|---|---|---|---|
Quant Small Cap Fund | 0.58% | 12,345 | 38.2% | 28.5% |
Nippon India Small Cap | 0.78% | 45,678 | 35.6% | 26.8% |
HDFC Small Cap Fund | 0.88% | 23,456 | 32.4% | 24.3% |
Axis Small Cap Fund | 0.65% | 18,765 | 30.1% | 22.7% |
SBI Small Cap Fund | 0.80% | 15,432 | 29.5% | 21.9% |
(Data as of June 2024; Returns are subject to market risks.)
Factors to Consider Before Investing
- Risk Appetite: Small-cap funds are volatile—only invest if you can handle short-term fluctuations.
- Investment Horizon: A minimum 5-7 years is recommended to ride out volatility.
- Fund Performance: Check 3-5 year returns instead of just 1-year returns.
- Expense Ratio: Lower expense ratios mean higher net returns.
- Fund Manager’s Track Record: Experienced management can navigate market cycles better.
Conclusion
Small-cap mutual funds can deliver superior returns but come with higher risks. Funds like Quant Small Cap, Nippon India Small Cap, and HDFC Small Cap have consistently performed well.
Before investing, assess your financial goals, risk tolerance, and investment horizon. Diversify your portfolio and avoid overexposure to small caps.
Disclaimer
Mutual fund investments are subject to market risks. Past performance is not indicative of future returns. Please read the Scheme Information Document (SID) and Key Information Memorandum (KIM) carefully before investing. Consult a financial advisor if needed. The information provided here is for educational purposes only and should not be considered investment advice.
Further Reading:
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