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    Small cap mutual funds

    Synopsis

    According to Sebi, small cap mutual fund schemes must invest at least 65% of their corpus in small companies.

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    Small cap mutual funds invest mostly small-sized companies. According to Sebi, small cap mutual fund schemes must invest at least 65 per cent of their corpus in small companies or companies that fall below 251 in terms of market capitalisation.

    Market capitalization, commonly called market cap, is the market value of a publicly traded company's outstanding shares. Market capitalization is equal to the share price multiplied by the number of shares outstanding. Since these schemes invest in stocks of small-sized companies, they are considered very risky.

    They can also extremely volatile. However, they also have the potential to offer very high returns. Due to these reasons, small cap schemes are only suitable for investors with a very high risk appetite, ability to stomach extreme volatility, a long investment horizon.

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