Some readers wanted to know the kind of returns they can expect from these schemes. As you know, the past performance is not an indication of future performance. However, since we have a tendency to look at the past performance, we decided to look at the past performance of these schemes, especially over a long period. We looked the performance of these schemes in 10 years. We also looked the performance of the benchmarks of these schemes to make sure the performance is genuine.
The small cap category offered an average return of 19% over 10 years. These schemes offered returns between 15% and 25% in 10 years. Nippon India Small Cap Fund, the topper in the category, offered 25% in 10 years, while Quant Small Cap Fund offered barely 15% returns. The benchmark returns ranged between 12-16%, making it clear that even an Index gained double-digits during the period.
Impressed? Before investing in small cap schemes, you should keep certain things in mind. Small cap schemes are extremely risky as they invest in very small companies. These companies may have governance issues and they also face challenges in their respective fields. These companies suffer the most in a bad market phase in the market. In short, if you don’t have the stomach for a lot of risk and volatility, do not invest in small cap schemes. You should also have very long investment horizon – seven to 10 years -to make money from small cap schemes.
If you are interested to invest in these schemes, here are our recommended small cap schemes: Best small cap funds to invest in 2023