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Find out the features and benefits of investing in Small Cap Mutual Funds, the investment strategies, risks and more.
One of the most popular investment options chosen by conservative and aggressive investors alike, mutual funds help you grow your money and earn inflation-adjusted returns. These funds are managed by professional fund managers, who pool together money from various investors to invest in specific schemes in tune with their investment objectives and risk appetites. The SEBI has categorised mutual funds into several different types, and small-cap mutual funds are one of the categories. Find out what is small-cap mutual fund in this article.
When it comes to investing in mutual funds, investors check for an important factor – the market capitalisation of the company. Now, small-cap mutual funds are those that invest in all companies trading on the stock exchanges, except the top 250 companies in terms of market capitalisation. In general, investing in small-cap funds is considered risky as they are more prone to volatility in the short term. However, you can earn higher returns if you stay invested in these funds in the long term. While there is excellent potential for booking profits, you also have to account for the risks associated with small-cap mutual funds. Small-cap mutual funds are ideal for investors with aggressive risk appetites – those who do not mind braving market volatility to earn significantly higher long-term returns.
Having explained small-cap funds meaning, let us understand the reasons why you should consider investing in them. They are as under:
Here are some attributes to look for while selecting small-cap funds for your investments:
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If you choose to invest in small-cap mutual funds, consider these points before investing:
Now that you know what is small cap fund, you can consider investing. These funds are ideal for investors with an aggressive risk appetite. If you are comfortable investing in significantly unknown companies with higher growth potential, you can consider investing in small-cap funds. You may also consider small-cap if you do not mind staying invested for the longer term and if you can absorb short-term market volatility and corrections. Typically, it would help if you stayed invested for at least 5 to 7 years to gain maximum benefit from investing in small-cap funds.
If you are looking to invest in mutual funds, download the digibank by DBS app today and choose from over 200 schemes! Also, open your savings account online with us.
*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.