When it comes to investing in publicly traded companies, it's important to understand the different characteristics. Companies are divided into three categories: large-cap, mid-cap, and small-cap. Among them, smaller companies have the potential to generate the highest return on your investment. However, it is very important to remember that these are also high risk and price movements can change.
Investing in small businesses
One of the best ways to reduce the risk associated with small-cap companies is to invest through small-cap mutual funds. These funds provide diversification by investing in a basket of smaller companies across industries. By distributing the money, the risk is reduced and the potential for high returns remains constant.
Small Cap mutual funds performing well in 2023
If you want to invest a small amount, here are some of the best things to consider:
1. Nippon India Small Equity Fund
Cost: Rs. 23,756 crores
Founded in 1995, Nippon India Small Equity Fund is one of the largest small equity funds in India. Invest in companies in 11 different industries, mainly in capital goods, finance, chemicals and consumer goods. It outperforms the broader market and delivers a three-year annualized return of about 40.29%. As of 13 March 2023, the Net Asset Value (NAV) of the fund is Rs. 100.15.
2. Quantum Small Equity Fund
Cost: Rs. 2,870.43 crore
Quant Small Cap Fund is recognized as one of the best performing small cap funds in India. It has achieved an enormous annual return of 60.05% over the past three years, the highest in the country. Investing in more than 9 different sectors such as consumer goods, finance, metals and mining and construction, this fund offers a diversified portfolio. As of 13 March 2023, the NAV of the fund is Rs. 148.51.
3. SBI Small Equity Fund
Cost: Rs. 15,348.09 crores
Introduced in 1987, the SBI Small Cap Fund allocates approximately 65% of its total funding to small-cap companies. It has developed its portfolio in 9 sectors, mainly services, commodities, consumer rights and chemicals. The fund's three-year non-performing return is around 32.19%, positioning it as one of the best performing small mutual funds in India. The NAV of the fund as of 13 March 2023 is Rs. 122.78.
4. HDFC Small Equity Fund
Cost: Rs. 14.649.44 crores
Founded in 1999, HDFC Small Equity Fund focuses on strong small-cap companies in industries including services, finance, commodities, chemicals, among others. The total amount exceeds Rs. It delivered a healthy three-year return of 14.649.44 crore and 36.37%. Significant investments in Sonata Software, Focus Solutions and eClerx Services. As of 13 March 2023, the NAV of the fund is Rs. 88.69.
5. Tata Small Equity Fund
Cost: Rs. 3,117.26 crores
Total assets of Tata Small Equity Fund, which is owned by Tata Mutual Fund, is approximately Rs. 3,117.26 crores. It invests in 9 sectors including services, finance, chemicals, consumer goods and commodities. With a three-year annual return of approximately 36.96%, this fund performs well in a wide range of market conditions. As of 13 March 2023, the NAV of the fund is Rs. 25.28.
6. ICICI Prudential Small Equity Fund
Cost: Rs. 4,598.77 crores
The ICICI Prudential Small Equity Fund was launched in 1993 and currently the fund size is Rs. 4,598.77 crores. It has spread its investments in 8 different sectors, with service, health, commodities and chemistry being the most popular sectors. The fund has generated approximately 34.68% annual returns over the last three years. With a low Net Asset Value (NAV) of Rs. 57.38 as of March 13, 2023, this fund is considered valuable and is one of the best performing small mutual funds
In summary, if you are considering investing in smaller investments in 2023, the mentioned options offer higher returns. However, it is important to remember that investing in these types of funds carries some risk and returns vary. To start investing, you will need to open a demat account in your own name. Contrary to popular belief, this process is simple and can be completed online. By visiting the Motilal Oswal website, you can fill out an online application form and submit it for account opening. Once your account is active, you can continue to invest in mutual funds, upcoming IPOs and other securities. Remember to do your due diligence and consult a professional before making any investment decision.
Also Read: List of 5 Best Performing Shares in India for 2023