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What are Small Cap Funds?| Who should ideally invest in them?

  • Tejesh Kumar
  • Jan 21 2019
  • 3 minutes
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Now let me enlighten you on Small cap funds.
Small Cap Funds are under segment of open ended equity funds these funds typically invest in small cap stocks that basically rank in the list of market capitalization below the 250th rank.
Small cap stocks in essence are more volatile as compared to mid cap stocks and large cap stocks.
The interesting part about small cap funds is that it gives the fund manager the opportunity to explore niche and under research stocks in this segment since these are the stocks beyond the 250th rank the list of small cap stocks is huge and a fund manager who can very well pick quality small cap stocks can generate very good returns as the small cap stock has a huge potential to increase its valuation over a period of time,
so for investors having:

  • An aggressive risk appetite and
  • A longer investment horizon.

Small cap stocks are expected to outperform mid cap and large cap stocks in the longer run, so for investors looking out for an agressive bet small cap funds is the category that you need to go about with.
Small cap funds are also equity oriented funds and follow the same taxation such as equity funds as a category so the taxation is such,

  • If you redeem and book profits in less than 1 year of holding the profits will be taxed at 15% flat.
  • If you book profits after holding for a period over and above 1 year it qualifies as a long-term capital gain and gains over and above Rs.1 lakh in the given financial year will be taxed at 10%.
    Here is the bottom line, small cap funds hold a lot of potential to increase your wealth over a longer period of time, what is required is
    1)Patience.
    2)Risk appetite.

so if you are looking to invest in small cap funds the best way to do it is through the My Way Wealth app all you need to do is open your My Way Wealth app and select small cap funds and we will give you the best funds in the category, you will be done investing in less than 2 minutes so as I always say the best time to invest is right now and the best way to do it is through My Way Wealth.

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