ETMutualFunds considered the returns made by SIP investments (XIRR) in small cap schemes and compared them with returns made by large cap, mid cap, and flexi cap schemes in 10 years. Their performance reveals that small cap schemes indeed gave better returns than the other three categories under consideration in 10 years.
The top 10 schemes in the small cap category offered XIRR returns between 17.52%-24.47% in 10 years. The top 10 schemes in the mid cap category offered returns between 17.35%-20.51% in 10 years. In 10 years, the top 10 schemes in the flexi cap category gave returns between 13.64%-20.82%. The top 10 schemes in the large cap category offered returns ranging between 12.59%-15.04% in a 10-year horizon. As you can see, small cap schemes are on top of the return chart, closely followed by mid cap schemes.
The small cap category gave an average return of around 20.31% in a 10-year horizon. Nippon India Small Cap Fund, the topper in the category, offered 24.47% in 10 years. Quant Small Cap Fund gave 23.55% during the same time period. SBI Small Cap Fund and Axis Small Cap Fund gave around 21%. Three small cap schemes offered around 20%. Aditya Birla Sun Life Small Cap Fund gave 15.15%.
Around 19 mid cap schemes completed 10 years of existence in the market. The mid cap category offered an average return of around 17.32% in the 10 year horizon. Quant Mid Cap Fund, the topper in the mid cap category, offered around 20.51% in 10-year horizon.
HDFC Mid-Cap Opportunities Fund, the largest scheme in the mid cap category based on assets managed, offered 19.39%. Three other schemes offered around 19%.
Around five schemes in the mid cap category gave 17%. Aditya Birla Sun Life Midcap Fund gave the lowest return of around 14.88%.
In the flexi cap category, around 16 schemes completed 10 years in the market. These schemes gave an average return of around 14.33% in the 10-year horizon. Quant Flexi Cap Fund, the topper in the category offered 20.82%. Parag Parikh Flexi Cap Fund, the largest scheme in the category based on assets, offered 18.60%.
JM Flexicap Fund and HDFC Flexi Cap Fund gave 17.37% and 15.88% respectively.Franklin India Flexi Cap Fund gave 15.15%. Two schemes gave around 14%. LIC MF Flexi Cap Fund and Taurus Flexi Cap Fund gave 10.39% and 10.10% respectively.
Around 23 large cap schemes have completed 10 years in the market. The large cap category offered an average return of around 12.37%. Nippon India Large Cap Fund, the topper in the large cap category, offered 15.04% in the 10-year horizon. ICICI Prudential Bluechip Fund, the largest scheme in the large cap category based on assets managed, gave 14.34%. The scheme manages assets of Rs 41,269.15 crore. Around seven schemes in the large cap category offered around 13%.
Around five schemes in the category gave around 12%. Taurus Largecap Equity Fund, the smallest scheme in the large cap category, offered 9.85%.
The above study indicates that aggressive investors can consider investing in small cap schemes as they offer superior returns than mid cap, large cap, and flexi cap schemes. Small cap schemes are recommended only to aggressive investors with a very high risk appetite and very long investment horizon. However, if you don’t have the stomach for huge risk, you should stick to schemes that are relatively safe.
Note, the above exercise is not a recommendation. The purpose of this exercise was to find out if small cap schemes do really offer high returns. One should not make investment or redemption decisions based on this exercise.
One should always consider risk appetite, investment horizon, and goal before making investment decisions. Past performance does not guarantee future performance.
If you are looking for recommendations, see:
Best small cap mutual funds to invest in 2023
Best mid cap mutual funds to invest in 2023
Best flexi cap mutual funds to invest in 2023
Best large cap mutual funds to invest in 2023
