Top 3 Small Cap Funds for 2018 in India
In the last three years, we have seen the small and microcap category perform exceptionally well. The category also attracted a lot of investor interest and money. Small cap and mid cap funds are such funds which are though volatile but have high growth possibilities. We discuss the advantages of small cap funds.
Advantages of Small Cap Funds
1. High Growth Potential
These funds have high growth possibilities because of their low market capitalization. For example, it is easier for a company of size of Rs. 10 crore to double its size than for a company with a size of Rs. 1000 crore. These firms enter the market with new product offerings which allow them to grow rapidly, thus boosting your returns.
2. Benefit from Undervaluation
Small and micro-cap companies generally have low equity research coverage. The market cap of these firms can be lower than their intrinsic value. You will pocket returns when the market price converges towards the true value.
3. Focused Business Models
Small and micro-cap companies operate with extremely focused business models on account of small size. These companies being new entrants are focused and operate extremely efficiently. This focus helps them to grow rapidly and this expansion helps their investors in fast growth of their investments.
Upwardly presents three best small cap funds for 2018.
1. Reliance Small Cap Fund
This is one of the rare funds in the equity space which has beaten it’s benchmark as well as category over all time frames: one year, three years, five years or even seven years. Managing solid performance, even in bear phases, without leaning on large-caps is creditable. Over three and five years, the fund has been ahead of its benchmark by 6 to 13 percentage points. Compared to the category, it has managed 3 to 5 percentage point outperformance. A SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹8.2 lakhs now.
2. L&T Emerging Businesses Fund
This fund has given impressive performance over the last 3 years. The fund’s objective is to invest in emerging businesses built around a scalable opportunity with strong leadership, good governance and balance sheet strength. With 1-year and 3-year annualized returns of 37.36% and 23.47% respectively, the fund has outperformed its benchmark by 7 to 8 percentage points and peers by 5 to 7 percentage points. A SIP of ₹5,000 p.m. in this fund started 3 years ago is worth ₹2.6 lakhs now.
3. Franklin India Smaller Companies Fund
This fund has outperformed its benchmark without a break for the last nine years. In terms of investing style, it manages a balance between businesses with an acceptable level of quality, growth and sustainability. On a three and five-year basis, it has outperformed its benchmark by 2 to 10 percentage points but has been neck and neck with the category. It’s asset size rapidly increased to over Rs. 7200 cr in 2018. A SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹6.8 lakhs now.
Invest in the best Mutual Funds on www.Upwardly.in. Happy Investing!!
Originally published at www.upwardly.in on February 22, 2018.
