The small cap mutual funds category has given an average return of around 60% in 2021. The category has offered 59% returns this year to date. There are around 26 schemes that have completed a year in the category.
The topper in the category - Quant Small Cap Fund - offered around 87% in 2021, according to Value Research. Six small schemes managed to offer more than 70% returns in this calendar year. Around 22 schemes have managed to offer around 50% returns in the year.
S&P BSE 250 SmallCap TRI benchmark offered around 56% returns in the year. Around19 small cap schemes managed to beat the benchmark return.
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As per Value Research data, the toppers in the category are:
- Quant Small Cap Fund: 86.74%
- L&T Emerging Business Fund: 74.93%
- Principal Small Cap Fund: 73.17%
- Nippon India Small Cap Fund: 70.27%
- Canara Robeco Small Cap Fund: 70.17%
The laggards in the category are:
- ITI Small Cap Fund: 33.26%
- SBI Small Cap Fund: 44.74%
- IDFC Emergency Business Fund: 48.78%
- ABSL Small Cap Fund: 49.04%
- UTI Small Cap fund: 54.23%
Mutual fund advisors say that investors, especially new investors, should not get into these schemes expecting the same high returns. Many small cap stocks have already run up quite a bit, and there could be meaningful corrections in the coming year.
Even otherwise returns alone should never be your criteria to invest in any mutual fund category. You should always look at your risk profile and investment horizon before choosing a mutual fund scheme.
Small cap mutual funds are recommended to investors with a long investment horizon and aggressive risk profile. So, you should invest in these mutual funds only if you crave the stomach to tolerate a lot of volatility and huge losses. You should also have a long investment horizon of seven to 10 years.
According to mutual fund advisors, new investors should not think that the small cap segment will fall and recover in no time. Advisors say small caps take time to recover but they are quick to fall in a bad market. This is the reason why these schemes are not recommended to feeble investors.
