3 Small Cap Mutual Funds That Delivered Over 20% Returns
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Small-cap funds can turn early investments in tomorrow's big companies into long-term wealth, but chasing past returns alone can expose investors to unnecessary risk.
✨ Key Takeaways
Small-Cap Mutual Funds have attracted investors looking for higher growth potential from smaller companies. These funds invest predominantly in small-cap stocks, which can benefit from India's long-term economic expansion and the growth of emerging businesses.
However, the possibility of higher returns comes with higher risk. Small-cap companies can be more vulnerable to economic slowdowns, rising costs and difficult market conditions. Their share prices can also see sharp swings.
This makes it important for investors to look beyond past returns while selecting a small-cap mutual fund.
What is a Small Cap Mutual Fund?
Small-cap mutual funds are equity mutual funds that invest predominantly in small-cap companies. Under the Securities and Exchange Board of India (SEBI) classification, small-cap companies are ranked below the top 250 listed companies by full market capitalisation.
These companies are generally smaller than Large-Cap and Mid-Cap businesses. Some may be in the early stages of building their market presence and have significant room to expand.
For investors, this creates an opportunity to participate in businesses that could become larger companies over the long term. At the same time, smaller businesses may have less financial strength and fewer resources to withstand difficult market conditions.
As a result, small-cap funds can be considerably more volatile than large-cap funds.
Also Read - Mutual Fund Unclaimed Money Rises 153% to Rs 3,811 Crore in FY26
Top Small Cap Mutual Fund Schemes by 5-Year SIP Returns
Based on the data provided, 35 small-cap mutual fund schemes are available for comparison. Among the schemes listed, the following have delivered strong annualised returns over a five-year monthly SIP period:
|
Fund |
Fund Size |
5-Year SIP Return (p.a.) |
|
ITI Small Cap Fund |
₹3,454 crore |
21.98 per cent |
|
Bandhan Small Cap Fund |
₹31,103 crore |
21.70 per cent |
|
Invesco India Smallcap Fund |
₹14,475 crore |
20.98 per cent |
Should You Invest Based Only on Past Returns?
No.
Past performance is useful for understanding how a fund has performed during different market conditions. But it does not tell the complete story.
Two small-cap funds can generate different returns even when they invest in the same broad category. Their portfolio composition, stock-selection approach, sector exposure and risk management can vary significantly.
Investors should therefore consider several factors before selecting a fund.
Disclaimer: The article is for informational purposes only and not investment advice.