Small-cap equity mutual fund gives CAGR of 54% in 3 years. Should you invest?

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Mutual fund calculator: Investing in small-cap equity mutual fund is risky but it gives highest return in bulls case. Quant Small Cap Fund — a small-cap equity mutual fund — is a glaring example of it. This equity fund has generated around 35 per cent per annum and it’s benchmark i.e. S&P BSE 250 SmallCap TRI has generated a CAGR of around 28.5 per cent per annum in last 3 year time. Quant Small cap fund has not only beaten all it’s peer funds but also the category average and benchmark in 3 year time frame by generating close to 54 per cent per annum in this time horizon.

Speaking on Quant Small Cap Fund, Nidhi Manchanda, Head of Training — Research & Development at Fintoo said, “Quant Small Cap Fund has managed the risk also quite well along with delivering the higher returns. It has higher risk adjusted returns which is seen with higher Sharpe ratio. It has also managed to control the downside risk. Beta of this fund is 0.94 which indicates slightly less volatile than the benchmark.”

Should you invest?

On whether one should invest now in this small-cap equity mutual fund, the certified financial planner at Fintoo said, “In this fund, current exposure to Small Cap stocks is around 54 per cent, Mid cap – 25 per cent and Large cap – 20 per cent. As it is decently diversified across all three market capitalisation, aggressive to moderate investors can invest into this fund. Also, one should invest in this fund for long term investment tenure of at least 5 years.” However, the expert said that starting an SIP in this fund would be suggested instead of putting a lumpsum at one go.

Echoing with Nidhi Manchanda’s views, Vinit Khandare, CEO & Founder at MyFundBazaar said, “With a CAGR of 54 per cent for a duration of 3 years, an SIP is a preferred investment option for mutual funds: allowing the investors to benefit from the rupee cost averaging process, regular deposits as per the affordability of the investor & easy on the pocket, leading to a better and more affordable investment option, a diverse investment portfolio leading to better and higher returns in the long term period and an ideal holistic investment option for both new investors as well as market experts.”

‘While an investment in mutual funds through the SIP or Lump Sum method is the investor’s call and their risk-taking appetite, a thorough scrutiny of the mutual fund, analysing its overall return performance, method of payment beneficial, etc. is imperative before investing their hard-earned money towards a sustainable financial future,” MyFundBazaar expert concluded.

Impact on investment

If an investor had invested 1 lakh upfront and 10,000 monthly SIP three years ago, the absolute value of one’s investment in last 3 years had been 11,27,561, says Value Research data. If the same had been done 5 years ago, absolute value of one’s investment had been 17,27,159.

Disclaimer: The views and recommendations made above are those of individual analysts or personal finance companies, and not of Mint.

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