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What are Small Cap Mutual Fund?

Small cap mutual fund schemes invest in stocks of small sized companies or in stocks of companies with small-sized market capitalization. While ranking companies according to their market capitalization starting with the firm that has the highest market cap, as per SEBI , companies ranked 251 and beyond are known as small-cap companies. Small-cap funds are the riskiest as compared to large and mid-cap funds. However, one needs to realize that effectively run small cap companies transform into mid cap and large cap companies over time. Investors considering small-cap funds must be prepared to deal with extremely volatility over the short term and be patient with their investment for at least five years.

What are Mid Cap Mutual Fund?

Mid cap mutual fund schemes invest in stocks of mid-sized companies or in stocks of companies with mid-sized market capitalization. While ranking companies according to their market capitalization starting with the firm that has the highest market cap, as per SEBI , companies ranked between 101 and 250 are known as mid-cap companies. Mid-cap funds are less risky than small-cap funds but riskier than large-cap funds. Investors considering mid-cap funds must be prepared to deal with considerable volatility over the short term and be patient with their investment for at least five years.

Small and mid-cap funds must be considered when one is planning to invest for long term goals which are at least 7 to ten years away.

How to invest in small cap funds and mid cap funds?

One can either invest a lumpsum amount or through a SIP method