Small cap funds should never be invested for a long term like 20 years. At best they can be invested for about 2 - 3 years. Generally you have a Bull cycle followed by a Bear cycle in stock markets. A bear cycle is for 3 - 4 years & a bull cycle is for 1 - 2 years. Filter. Small Cap Fund : These mutual funds select stocks for investment from the small cap category, which includes all stocks except largest 250 stocks (by market capitalization). Suitable For : Investors who are looking to invest money for at least 3-4 years and looking for very high returns. Invesco India Smallcap Fund Direct GrowthHow long should I invest in a small-cap?
How many years is a small-cap fund good for?
Which small cap fund gives the highest return?
Fund Performance: The Invesco India Smallcap Fund has given 21.89% annualized returns in the past three years and 30.36% in the last 5 years. The Invesco India Smallcap Fund comes under the Equity category of Invesco Mutual Funds.
Small-cap funds are riskier than large-cap funds and may not be suitable for everyone. Small-cap companies are more sensitive to market changes and can experience sudden and wide price fluctuations. Small-cap companies are less popular and smaller in size, making their stock less liquid.
Most investors think smaller companies underperform in a recession. In most cases, they are correct. However, what's less well-known is that small caps usually exit recessions quicker than assumed – outperforming large caps. This rebound can begin as early as three months into an economic downturn.
The main disadvantage of a small-cap fund is its higher risk profile, making it susceptible to market volatility and economic downturns.
The small cap segment can be extremely volatile in the short term, but they have the potential to offer very high returns over a long period. Small cap schemes are recommended only to aggressive investors with a high-risk appetite and long investment horizon, say, around seven to 10 years.
Nifty Smallcap 100 index has fallen 4% to its lowest level since mid-June amid concerns about Q3FY25 performance. Disappointing earnings results have led to increased selling pressure, with many stocks down significantly from their 1-year highs and foreign investors pulling out funds.
Market experts recommend that investors hold small caps for at least 10 years to benefit and allocate 8% of the portfolio to small caps.
With small-cap mutual funds, always opt to invest for the long Term. Therefore, the minimum period for which you should be investing in small-cap mutual funds is 5-6 years. As mentioned earlier, small-cap mutual funds tend to be very volatile. For example, they may go up and down in the short Term.
Small Cap Mutual Funds: Up to 2. Given how high the risk is with these mutual funds, it is best to limit yourself to a limited number of small cap mutual funds. Also, avoid putting in a great percentage of your total mutual fund investment in small cap mutual funds. Debt Funds: Ideally 1, but 2 is also good.
The future outlook for mid-cap and small-cap funds is cautiously optimistic. With India's GDP expected to grow at 6.5%-7% in FY 2025-26, sectors represented in under the mid and small cap indices are poised for expansion.
Given the changing macroeconomic backdrop, we outline why we see potential value for investors in small caps in 2024. The consensus is that interest rates look to have peaked, with markets now pricing in cuts across many major economies in 2024, something which could prove beneficial to small caps.
In a recession, it's smart to preserve your capital by investing in safer assets, such as bonds, particularly government bonds, which can perform well during economic downturns.
We expect small-cap earnings growth could exceed that of large-cap stocks in 2025, aided by easier earnings comparisons.
Small-cap mutual funds are ideal for you if you have an investment horizon of five years and above, as small-cap stocks are volatile in the short term, and small-cap funds perform better in the long term.
It has to do with the great financial crisis and then the pandemic, quantitative easing. The low interest rates, the deficits, and obviously in the extreme case when the pandemic hit, we had aggressive monetary easing as well as fiscal stimulus.
Hence, it is important to have a long-term investment window while investing in Small-Cap Funds so that you give sufficient time to your investment to generate returns. The recommended time frame is eight to ten years. Making these funds highly suitable for long-term investors.
Kotak Small Cap Fund and Axis Small Cap Fund gave 29.08% and 28.43% returns respectively in 2024. Quant Small Cap Fund offered a 28.34% return in the mentioned period. Franklin India Smaller Cos Fund gave a 26.31% return in the said period.