Best Small Cap Mutual Funds to Invest in 2021
Best Small Cap Mutual Funds to invest in 2021-Before going into a detailed discussion on Best Small Cap Mutual Funds, you should keep in mind that a mutual fund is best-suited investment product only when you attach any financial goals to any particular mutual fund investment.
Redeeming or withdrawing your mutual fund investment when you have reached your financial goals or your financial goals are nearby, is as important as investing. Both investment and redemption should be treated with equal importance.
Taking the risk and investing without any financial objectives is of no use as you don’t know when you need to exit from the mutual fund investment even if you have attained the financial objectives for which you needed the corpus.
Now let’s know a few important aspects of the small cap mutual funds below:
What is Small Cap Funds?
A small cap fund is an equity fund, that mainly invests at least 65% of its assets in equity and equity-related investments of small cap companies. Small cap companies are those which rank below top 250th companies in terms of market capitalization.
Small cap funds are of high risks and if held for a long term, it can deliver a substantial return well over the risk-free return.
Why you should invest in Small Cap Funds?
- Larger investment basket: Small cap funds provide a greater basket of investment opportunity as compared to large cap, midcap or sectoral funds;
- Better growth prospect: Small cap companies have better growth prospects for the capacity of growing at a faster pace;
- Faster economic recovery: It has the ability to grow at a faster pace as compared to large and midcap funds during the economic recoveries as we can witness during this PANDEMIC situation;
- Market share: It has the ability to gain substantial market share due to the evolution of new technologies and well equipped technical know-how;
- Macro-economic factors: The returns from the small cap stocks are more influenced by its internal issues rather than the macro-economic factors;
- Underrated: Due to the lack of awareness among the investors, the small cap stocks can be purchased well below its intrinsic value, thus leaving a better opportunity for maximum returns.
- Greater risk-reward ratio: Being a small cap stock in nature, it has got high risk associated with it and has the ability to produce a stellar return. Thus carrying a high risk-reward ratio if held for a longer time horizon.
Before knowing the 5 best small cap mutual funds to invest in 2021, this is very crucial to know that for last few years specifically for last 4 to 5 years, small cap funds were a little bit silent. This sector could not produce the substantial returns that they were known for earlier.
Therefore, having seen the growth perspective for the last few months, experts are being very much bullish on the small cap funds for the coming 4 to 5 years.
Yes, Small cap funds are capable of generating 20% to 25% CAGR if the investment is held over 10 years of period. Hopefully, the next decade will be ruled by the small cap funds.
Key points to decide the best Small Cap Mutual Funds
The following key points have been taken into consideration while deciding the best Small Cap Mutual Funds to invest in 2021 in India:
- Long Term(7-10 yr): Funds which are being operated in the market for last 7 to 10 years and are doing reasonably well in this cycle have been considered.
- Asset Under Management(AUM): Funds having a minimum AUM of more than 1000 Cr has been considered.
- Expense Ratio: Funds which have a minimum expense ratio as low as below 1% have been taken into consideration.
- 15% minimum annualised return: Funds whose historical annualised return(CAGR) are less than 15% for the last 5 years have been kept out of the list instantly. Only funds which generated an annualised return more than 15% in the last 5 to 10 years cycle have been considered.
- Low Beta value: Beta measures the underlying risk of the scheme as compared to overall market risk. It changes in tandem with market risk. Therefore, a low beta value has been considered for the selection.
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In this post, I will discuss on the following 5 Best Small Cap Mutual Funds to invest in 2021 for the next 10 years.
1. SBI Small Cap Fund
SBI Small Cap Fund Basic Information:
| SBI Small Cap Fund Status | Details |
|---|---|
| AUM | ₹6,628.36 Cr |
| Expense Ratio | 0.96% |
| Investment in small-cap companies | 78.06% |
| Standard Deviation of the scheme | 26.45 |
| Beta of the scheme | 0.83 |
Investment strategy/Objective:
This fund offers the investors an opportunity for the long-term growth of their capital along with adequate liquidity by predominantly investing in a well-researched basket of small-cap companies.
How is the performance of SBI Small Cap Fund?
| SBI Small Cap Fund performance | 1 year | 3 year | 5 year | 7 year |
|---|---|---|---|---|
| ₹ 1 Lakh single investment would grow to | ₹1.35 L | ₹1.17 L | ₹2.45 L | ₹5.74 L |
| ₹10,000 monthly SIP would grow to | ₹1.67 L | ₹5.13 L | ₹9.84 L | ₹17.90 L |
| Annualised Return | 34.94% | 5.26% | 19.63% | 28.34% |
SBI Small Cap Fund Top 5 holding sector wise
Why you should invest in SBI Small Cap Fund?
- Rank 1: This fund is a 5* rated fund as chosen by the big-name investment websites. Also, due to its aggressive nature, this fund has taken top 1 rank in the list of my 5 best small cap mutual funds to invest in 2021 in India.
- 19.63% CAGR for last 5 years: This fund has been able to deliver a minimum CAGR of 19.63% for the last 5 years. This is quite impressive. This has made this fund to take the top 1st position in my list.
- Consistent performer: This scheme has been able to beat both its benchmark and category consistently since inception.
- High-risk high return: This fund is suitable for investors who have a high-risk tolerance. This fund has a high risk-reward ratio. Therefore, if one can remain invested for a longer horizon can expect an eye-catching return in future.
- Minimum investment period 7 years: If any investment in this fund is continued for more than 7 years, one can expect a superior return well over inflation-adjusted return and return from the fixed interest-bearing instruments.
- Past performance: Though past performance can not be the sole determining criteria, but from the above performance table, you can see that this fund has the ability to generate an annualised return of 28.34% over a period of 7 years. This is really appreciating.
2. Axis Small Cap Fund
Axis Small Cap Fund Basic Information:
| Axis Small Cap Fund Basic information | Details |
|---|---|
| AUM | ₹3,632 Cr |
| Expense Ratio | 0.40% |
| Investment in small-cap companies | 64.57% |
| Standard Deviation of the scheme | 24.48 |
| Beta of the scheme | 0.74 |
Investment strategy/Objective:
This fund offers the investors an opportunity for the long-term growth of their capital along with adequate liquidity by predominantly investing in a well-researched basket of small-cap companies.
The scheme seeks to generate long-term capital appreciation from a diversified portfolio of predominantly equity & equity related instruments of small cap companies.
How is the performance of Axis Small Cap Fund?
| Axis Small Cap Fund performance | 1 year | 3 year | 5 year | 7 year |
|---|---|---|---|---|
| ₹ 1 Lakh single investment would grow to | ₹1.24 L | ₹1.43 L | ₹2.23 L | ₹4.35 L |
| ₹10,000 monthly SIP would grow to | ₹1.59 L | ₹5.16 L | ₹9.64 L | ₹16.08 L |
| Annualised Return | 24.19% | 12.55% | 17.44% | 23.36% |
Axis Small Cap Fund Top 5 holding sector wise
Why you should invest in Axis Small Cap Fund?
- Rank 2: This fund is a 5* rated fund as chosen by the big-name investment websites. Also, due to its aggressive nature, this fund has taken top 2 rank in the list of my 5 best small cap mutual funds to invest in 2021 in India.
- 17.44% CAGR for last 5 years: This fund has been able to deliver a minimum CAGR of 17.44% for the last 5 years. This is quite impressive. This has made this fund to take the top 2nd position in my list.
- Protect losses: This fund has the ability to protect your capital from losses during market downtime.
- High-risk high return: This fund is suitable for investors who have a high-risk tolerance. This fund has a high risk-reward ratio. Therefore, if one can remain invested for a longer horizon can expect an eye-catching return in future.
- Minimum investment period 7 years: If any investment in this fund is continued for more than 7 years, one can expect a substantial return well over inflation and fixed interest-bearing instruments.
- Past performance: Though past performance can not be the sole determining criteria, but from the above performance table, you can see that this fund has the ability to generate an annualised return of 23.36% over a period of 7 years. This is really appreciating.
3. Nippon India Small Cap Fund
Nippon India Small Cap Fund Basic Information:
| Nippon India Small Cap Fund Basic information | Details |
|---|---|
| AUM | ₹10,916 Cr |
| Expense Ratio | 1.08% |
| Investment in small-cap companies | 61.43% |
| Standard Deviation of the scheme | 28.91 |
| Beta of the scheme | 0.91 |
Investment strategy/Objective:
This fund offers the investors an opportunity for the long-term growth of their capital along with adequate liquidity by predominantly investing in a well-researched basket of small-cap companies.
This fund has been able to outpace peers in rising markets and keep losses below them during a correction.
How is the performance of Nippon India Small Cap Fund?
| Nippon India Small Cap Fund performance | 1 year | 3 year | 5 year | 7 year |
|---|---|---|---|---|
| ₹ 1 Lakh single investment would grow to | ₹1.23 L | ₹1.09 L | ₹2.22 L | ₹4.54 L |
| ₹10,000 monthly SIP would grow to | ₹1.68 L | ₹4.82 L | ₹8.90 L | ₹15.38 L |
| Annualised Return | 26.85% | 2.30% | 16.72% | 24.02% |
Nippon India Small Cap Fund Top 5 holding sector wise
Why you should invest in Nippon India Small Cap Fund?
- Rank 3: This fund is a 4* rated fund as chosen by the big-name investment websites. Also, due to its aggressive nature, this fund has taken top 3 rank in the list of my 5 best small cap mutual funds to invest in 2021 in India.
- 16.72% CAGR for last 5 years: This fund has been able to deliver a minimum CAGR of 16.72% for the last 5 years. This is quite impressive. This has made this fund to take the top 3rd position in my list.
- Protect losses: This fund has the ability to protect your capital from losses during market downtime. This fund has been able to outpace peers in rising markets and keep losses below them during a correction.
- High-risk high return: This fund is suitable for investors who have a high-risk tolerance. This fund has a high risk-reward ratio. Therefore, if one can remain invested for a longer horizon can expect an eye-catching return in future.
- Minimum investment period 7 years: If any investment in this fund is continued for more than 7 years, one can expect a substantial return well over inflation and fixed interest-bearing instruments.
- Past performance: Though past performance can not be the sole determining criteria, but from the above performance table, you can see that this fund has the ability to generate an annualised return of 24.02% over a period of 7 years.
4. Kotak Small Cap Fund
Kotak Small Cap Fund Basic Information:
| Kotak Small Cap Fund Basic information | Details |
|---|---|
| AUM | ₹2,372 Cr |
| Expense Ratio | 0.62% |
| Investment in small-cap companies | 58.71% |
| Standard Deviation of the scheme | 28.33 |
| Beta of the scheme | 0.81 |
Investment strategy/Objective:
This fund offers the investors an opportunity for the long-term growth of their capital along with adequate liquidity by predominantly investing in a well-researched basket of small-cap companies.
The scheme is well-positioned to provide the benefit of potential growth offered by small cap stocks. This scheme likes to invest in younger small cap companies and watch them grow.
How is the performance of Kotak Small Cap Fund?
| Kotak Small Cap Fund performance | 1 year | 3 year | 5 year | 7 year |
|---|---|---|---|---|
| ₹ 1 Lakh single investment would grow to | ₹1.34 L | ₹1.28 L | ₹2.33 L | ₹4.03 L |
| ₹10,000 monthly SIP would grow to | ₹1.75 L | ₹5.27 L | ₹9.36 L | ₹15.54 L |
| Annualised Return | 34.29% | 8.45% | 18.38% | 22.04% |
Kotak Small Cap Fund Top 5 holding sector wise
Why you should invest in Kotak Small Cap Fund?
- Rank 4: This fund is a 4* rated fund as chosen by the big-name investment websites. Also, due to its aggressive nature, this fund has taken top 4 rank in the list of my 5 best small cap mutual funds to invest in 2021 in India.
- 18.38% CAGR for last 5 years: This fund has been able to deliver a minimum CAGR of 18.38% for the last 5 years. This is quite impressive. This has made this fund to take the top 4th position in my list.
- Protect losses: This fund has the ability to protect your capital from losses during market downtime. This fund has been able to outpace peers in rising markets and keep losses below them during a correction.
- High-risk high return: This fund is suitable for investors who have a high-risk tolerance. This fund has a high risk-reward ratio. Therefore, if one can remain invested for a longer horizon can expect an eye-catching return in future.
- Minimum investment period 7 years: If any investment in this fund is continued for more than 7 years, one can expect a substantial return well over inflation and fixed interest-bearing instruments.
- Past performance: Though past performance can not be the sole determining criteria, but from the above performance table, you can see that this fund has the ability to generate an annualised return of 22.04% over a period of 7 years.
5. HDFC Small Cap Fund
HDFC Small Cap Fund Basic Information:
| HDFC Small Cap Fund Basic information | Details |
|---|---|
| AUM | ₹9,596 Cr |
| Expense Ratio | 0.89% |
| Investment in small-cap companies | 72.77% |
| Standard Deviation of the scheme | 18.42 |
| Beta of the scheme | 0.73 |
Investment strategy/Objective:
This fund offers the investors an opportunity for the long-term growth of their capital along with adequate liquidity by predominantly investing in a well-researched basket of small-cap companies.
The scheme is well-positioned to provide the benefit of potential growth offered by small cap stocks. This scheme looks for companies with strong management and robust business models.
This fund takes cash calls/low-risk debt exposure to protect capital in an overheated market. It has excellent downside protection capabilities that make this fund lose less and win big.
How is the performance of HDFC Small Cap Fund?
| HDFC Small Cap Fund performance | 1 year | 3 year | 5 year | 7 year |
|---|---|---|---|---|
| ₹ 1 Lakh single investment would grow to | ₹1.19 L | ₹1.06L | ₹2.13 L | ₹3.06 L |
| ₹10,000 monthly SIP would grow to | ₹1.65 L | ₹4.41 L | ₹8.18 L | ₹13.52 L |
| Annualised Return | 19.45% | 1.04% | 15.24% | 17.20% |
HDFC Small Cap Fund Top 5 holding sector wise
Why you should invest in HDFC Small Cap Fund?
- Rank 5: This fund is a 3* rated fund as chosen by the big-name inv
- estment websites. Also, due to its aggressive nature, this fund has taken top 5 rank in the list of my 5 best small cap mutual funds to invest in 2021 in India.
- 15.24% CAGR for last 5 years: This fund has been able to deliver a minimum CAGR of 15.24% for the last 5 years. This is quite impressive. This has made this fund to take the top 5th position in my list.
- Protect losses: This fund has the ability to protect your capital from losses during market downtime. This fund has been able to outpace peers in rising markets and keep losses below them during a correction.
- High-risk high return: This fund is suitable for investors who have a high-risk tolerance. This fund has a high risk-reward ratio. Therefore, if one can remain invested for a longer horizon can expect an eye-catching return in future.
- Minimum investment period 7 years: If any investment in this fund is continued for more than 7 years, one can expect a substantial return well over inflation and fixed interest-bearing instruments.
- Past performance: Though past performance can not be the sole determining criteria, but from the above performance table, you can see that this fund has the ability to generate an annualised return of 17.20% over a period of 7 years.
