What are Small Cap Mutual Funds?

Small-Cap Funds are Mutual Fund schemes that invest at least 65% of their total assets in equity and equity-related securities of small-cap companies. Small cap companies are generally with a market capitalization of under Rs 100 crore, falling outside the top 250 companies by market capitalization, although their definition may vary among market intermediaries.

Characteristics of Small-Cap Mutual Funds
•    Invests in small-cap companies with high growth potential.
•    Volatile and risky due to early development stage of the underlying companies.
•    May outperform mid- and large-cap funds in a bull market, underperform in a bear market.

Why Invest in Small-Cap Mutual Funds?
•    Significant Growth Potential: Investments in developing businesses with strong growth and diversification possibilities.
•    Undervalued Assets: Due to underestimation, investing in small businesses at lower costs may yield long-term returns as they grow.
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