Top 5 Best Small cap and Mid cap Mutual Funds to Invest in 2016

Mutual funds which diversify their investments in Mid cap and small cap companies are called as small and mid cap mutual funds. The proportion of investments between mid cap and small cap may vary from fund to fund.

These funds invest in a mix of mid cap and small cap stocks. Due to their exposure to high beta stocks, they are positioned on a high-risk return compared to a large cap fund. Mutual funds with an investment objective focused on capital appreciation within the mid-cap market allow investors to gain exposure to a broad range of company stocks within various regions and operating in different sectors. Prior to investing in a mid-cap growth mutual fund, review the most recent fund prospectus to understand the overall risk of the investment.

As you have learned How to Choose the Best Mutual Fund, I have used the same strategy to select these small caps & mid cap mutual funds. Few important selection factors are mentioned below.

  • Returns of the funds in last 5 years
  • Assets Under management (AUM) – AUM should be approximately greater than Rs. 1000 Cr.
  • Expense Ratio – Lower the expense ratio, higher the returns
  • Funds Past performance compared to benchmark index
  • CRISIL ranking – choose CRISIL 1 or 2 rank funds

All other selection considerations are explained here.

Top 5 Best Small Cap & Mid Cap Mutual Funds

Top 5 Best Small cap & Mid cap Mutual Funds

Top 5 Best Small cap & Midcap Mutual Funds (*Returns over 1 year are annualized)

Franklin India Smaller Companies Fund –

This is considered as best mid cap mutual fund as this has given excellent returns since it’s inception. This fund is managed by Mr. R. Janakiraman / Hari Shyamsunder. An Open End Diversified Equity Scheme which seeks to provide long-term capital appreciation by investing in mid and small cap companies. Normally, it would invest at least 75% of its assets in smaller companies.

Franklin India Smaller Companies Fund is an equity oriented mid-cap fund which means the majority of your money will be invested in stocks of mid and small sized companies such as FAG bearings, Voltas and Finolex Ind. Presently it has 9.25% exposure to large sized companies, 48.24% exposure to midsized companies and 38.12% exposure to small sized companies.

If you had started investing Rs 10,000 per month in August 2011 & continued till 5years (that is August 2016) then you would have got 13.09 lakh with CAGR of 32.63%. Rs 1 lakh invested 5 years back, will be worth of 2.37 lakh today.

 

DSP BlackRock Micro Cap

Second consistently performing fund over last few years. It has done a great job in maintaining its reputation by giving best returns when the market was not performing well. The fund managers of this scheme are Vinit Sambre & Jay Kothari. The scheme is open both for growth and dividend plans. This fund was launched in March 2007.

DSP BlackRock Micro Cap Fund aims to generate superior returns by investing in a diversified portfolio of small and mid-cap companies with high growth potential. In this fund, a majority of the portfolio is allocated to small-cap companies. The majority of the chunk in invested in Chemicals & Manufacturing sector.

DSP BlackRock Microcap fund has given a very strong performance over the last 5 years. It has done very well in the upside in bull markets, but it has been volatile in the bear markets.

Since launch, this fund has given whopping 25.98% CAGR.

If you had started investing Rs 10,000 per month in August 2011 & continued till 5 years (i.e. August 2016) then you would have got 13.73 lakh with CAGR of 34.90%. Rs 1 lakh invested 5 years back, will be 2.27 lakh today.

 

Mirae Asset Emerging Bluechip Fund

Mirae Asset Emerging Bluechip Fund is being managed by Neelesh Surana. This fund was launched in Jun 2010. This fund has 18% allocation to stocks of large-sized companies, 58% to mid-sized, and 22% to small sized companies.

The fund has constantly beaten its benchmark (Nifty Midcap 100) and category across various time frames. Over the past one year when the economy was weathering a downturn, the fund still delivered positive returns, whereas the benchmark and the category funds posted negative returns.

Since its inception on July 9, 2010, the fund always outpaced its benchmark and the category through all the market cycles. Note that this fund has Exit load of 2% if units are redeemed within first 6 months, which is higher than any other fund.

If you had started investing Rs 10,000 per month in August 2011 & continued till 5 years (i.e. August 2016) then you would have got 12.50 lakh with CAGR of 30.79%. Rs. 1 lakh invested 5 years back, would be 2.27 lakh today.

 

Reliance Small Cap Fund

Reliance Small Cap Fund is managed by Mr. Sunil Singhania. The primary investment objective of the scheme is to generate long-term capital appreciation by investing predominantly in equity and equity related instruments of small cap companies and the secondary objective is to generate consistent returns by investing in debt and money market securities.

Presently it has 6.48% exposure to large sized companies, 11.39% of mid-sized companies and 78% in small sized companies.

If you had started investing Rs 10,000 per month in August 2011 & continued till 5 years (i.e.  August 2016) then you would have got 12.72 lakh with CAGR of 31.55%. Rs. 1 lakh invested 5 years back, would value 2.05 lakh today.

 

SBI Magnum Mid Cap Fund

SBI Magnum midcap fund (G) was launched in 2005 & currently it is being managed by Sohini Andani. She has 15 years experience in this domain and took over in 2010. The fund’s performance is not convincing from few years, but it has maintained good returns.

Funds objective is to provide investors with opportunities for long-term growth in capital along with the liquidity of an open-ended scheme by investing predominantly in a well-diversified basket of equity stocks of Midcap companies. The fund invests about 71% in medium size companies and 29% in small size companies.

Since inception, it has produced annualized returns of 18.44%. It has managed to beat the benchmark index as well as category average comprehensively in last 5 year returns.

If you had started investing Rs 10,000 per month in August 2011 & continued till 5 years (i.e. August 2016) then you would have got 12.81 lakh with CAGR of 30.56%. Rs 1 lakh invested before 5 years back, would be 2.06 lakh today.

Conclusion

Investors with high-risk tolerance can consider investing in the small cap & mid cap mutual funds through the systematic investment plan (SIP) route for their long-term financial planning. Even though small and mid cap mutual funds like Franklin Smaller Cos., DSP BlackRock Micro Cap funds can give higher returns than the large cap or diversified equity funds, investors should also remember that the risk associated with small and mid-cap funds are higher.

Note that you should not withdraw your money when the markets go up or down. Make sure your goals are reached to withdraw your money.

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2 Replies

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  1. Prasad says:

    I plan to save money which I might require after 3 – 5 years (for purchasing propt/ vehicle/marriage). Considering that and my present earning I plan to invest 5000rs every month in form of SIPs. Is Equity small cap category funds advisable or Equity Large/Multicap better option. At this early stage I am open to slightly higher risk with better returns option. Please suggest.

    • Ashu says:

      Hi Prasad, Large caps are better considering the risk but offer bit lower returns than small/mid cap. As you said you investment term is 3-5 years, you can invest in few of the above mentioned funds to get good returns. I would advice you to have diversification in small, mid & large cap. Start Rs2000 SIP in small and mid cap each and Rs1000 in large cap.
      Let me know if you have any questions. Hope this helps!

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