What is a Small Cap Fund?
Who should invest in Small Cap Funds?
What are the risks of investing in Small-Cap Funds?
Small-Cap Funds can bring you losses over the short-term.
If you’re not prepared to see negative returns you should not invest in small-cap funds.
Small-Cap Funds also tend to fluctuate more in value than Mid-Cap or Large-Cap Funds
Small-Cap companies don’t have long protracted histories to base investments on. That means you may not have a lot of past performance to base your judgements on.
They have lower liquidity than large-cap funds
Small-Cap companies face more cash-flow issues during bad economic phases
Small-Cap companies face a larger threat in terms of change in consumer preferences
Why invest in Small Cap Mutual Funds?
Higher growth potential: It is easier for small-cap companies to generate big growth rates
To diversify your portfolio: If the rest of your portfolio is low-risk & low-return
Ideal if you are an aggressive investor: You have a win big or go home attitude
When demand is high, low liquidity can drive small-cap NAVs higher faster
They usually offer healthy returns in the long term