All About Small Cap Funds

05 Oct 2023

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All About Small Cap Funds

Small-cap funds are mutual funds or exchange-traded fund (ETF) that primarily invest in stocks of companies with relatively small market capitalizations. These funds can offer investors exposure to smaller, potentially faster-growing companies.

10-Year Performance of Small Cap vs Large Cap

10-Year Performance of Mid Caps

Features of small-cap funds

1. Focus on small-cap stocks

Small-Cap funds invest primarily (min. 65% of assets) in small-cap companies. SEBI defines small-cap companies as those which are ranked below the 250th rank in terms of market capitalization i.e. <  RS 500 crores.

2. Growth potential

Small cap stocks funds offer potential for higher return. Small caps have considerable growth opportunities and can be future mid caps.

3. Market volatility

Small-cap funds can experience above-average volatility due to the smaller market capitalization of the underlying stocks. This makes them susceptible to price fluctuations and greater sensitivity from market news and economic factors.

4. Investment horizon

Investment horizon in small cap funds must be on the higher side vis-à-vis large caps funds. Small caps can take time before they deliver on growth / profitability, so come prepared for 5 years or more in small cap funds.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. The information provided is generic in nature and is for informational purpose only. Please consult your financial advisor before taking any decision.

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    The contents of this article/infographic/picture/video are meant solely for information purposes and do not necessarily reflect the views of Bank of Baroda. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Bank of Baroda and/ or its Affiliates and its subsidiaries make no representation as to the accuracy; completeness or reliability of any information contained herein or otherwise provided and hereby disclaim any liability with regard to the same. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Bank of Baroda or its affiliates to any licensing or registration requirements. Bank of Baroda shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

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