We considered the CAGR returns of 21 small cap schemes that have completed three years in the market for the study. The CAGR returns for the small cap schemes were calculated for the period starting from May 24, 2020 to May 24, 2023.
Quant Small Cap Fund, the topper in the small cap category, offered 63.66% in the three-year horizon on lumpsum investments. Nippon India Small Cap Fund offered 50.57% return in the same time period.
The small cap category has offered an average return of 43.50% in the three-year horizon. The small cap category has offered around 22.88% in the last one year.
A lumpsum investment made on May 24, 2020 of Rs 10,000 in these 15 small cap schemes would have grown between Rs 27,450 to Rs 43,833 in the three-year period.
Please note, we have featured only schemes that have offered more than 40% in this story. Some schemes do not feature despite offering impressive returns of, say, 30% returns.
Small cap schemes invest in very small companies or their stocks. That is why investing in small cap stocks is considered extremely risky. The small cap segment can be extremely volatile in the short term, but they have the potential to offer very high returns over a long period. Small cap schemes are recommended only to aggressive investors with a high-risk appetite and long investment horizon, say, around seven to 10 years. ETMutualFunds do not recommend small cap schemes to new and inexperienced investors.
Note, the above exercise is not a recommendation. This exercise was just to analyse the performance of lumpsum investments in small cap mutual fund schemes in the three-year horizon. You need to include other factors while choosing a scheme to invest in. One should always consider their risk appetite, investment horizon, and goals before choosing mutual funds. One should not make investment or redemption decisions based on the above returns. Past performance does not guarantee future performance.
If you are looking for small cap recommendations, see:
Best small cap schemes to invest in 2023
