Riding the Rocket: A Look at Top Small-Cap Funds
Small-cap funds are like riding on a rocket ship; the upside is huge, but the road is choppy. Such funds target firms that are beyond the top 250 of the India market cap in the hope of finding tomorrow's market movers. This is a nostalgic kitty on the best 5 small-cap schemes, their work lasts 3-5 years, and how the performance compares with the boring fixed deposits and life insurance policies.
Top 5 Small-Cap Schemes
Bandhan Small Cap Fund (Direct – Growth)
Invesco India Smallcap Fund (Direct – Growth)
Quant Small Cap Fund (Direct – Growth)
Nippon India Small Cap Fund (Direct – Growth)
Franklin India Smaller Companies Fund
Dynamic 5-Year Investment Calculator
Post-Tax Returns on Your Investment (5-Year Horizon)
Calculations are based on the 5-year CAGR. Under India’s LTCG rules, gains above ₹1.25 lakh are taxed at 12.5%.
| Fund | Pre-Tax Value | Tax on Gains | Net Value (In Bank) |
|---|---|---|---|
| Bandhan Small Cap | |||
| Invesco India Smallcap | |||
| Quant Small Cap | |||
| Nippon India Small Cap | |||
| Franklin Smaller Co. |
Comparing with FD and Insurance
| Instrument | Gross Value | Net Value (After Tax) |
|---|---|---|
| Bank FD @7% p.a. (30% tax) | ||
| Insurance @6% p.a. (30% tax) |
Visualizing Net Returns (5-Year)
Important Consideration
Even post-tax, small-cap returns are significantly higher than "safe" FDs/insurance policies.
Why These Funds Shine
- Beating the Game: The top 5 funds listed have consistently outperformed benchmarks and peers.
- Focus on Growth: The core idea is to invest in India's fastest-growing companies while they are still small, capturing their explosive growth phase.
- Systematic Investing: Funds like Quant use quant models and data-driven strategies to identify opportunities, reducing human bias.
- Experienced Management: The funds are helmed by industry veterans with deep research capabilities and proven track records.
- Cost-Effective: All five are direct plans, meaning lower costs and commissions, which directly translates to higher returns for the investor.
A Note on Volatility
If the high-risk nature of small-caps is too much of a roller coaster, consider mid-cap funds. They offer a balance, with strong historical returns (around 29% p.a. over 5 years) and slightly less volatility than their small-cap counterparts.
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