Over the past ten years, small- and mid-cap mutual funds have significantly outperformed large- and mid-cap funds. If held for an extended period of time, they could potentially produce a relatively greater return. In contrast to other equity funds, however, they are more volatile.
The patient investor has benefited greatly from smallcap funds. While midcap funds and largecap funds recorded returns of 19 percent and 14 percent, respectively, during the past ten years, these schemes produced a compounded annualised return (CAGR) of 21 percent. While this was happening, the Nifty 500 TRI generated returns of 15%. This has also increased inflows. According to AMFI data, over the past year, smallcap equities funds experienced the greatest net inflows of all equity fund categories, totaling roughly Rs 25,800 crore.
During an economic upswing, smallcap funds typically outperform midcaps and largecaps, but they may underperform during uncertain periods. Smallcap funds, however, have the potential to produce somewhat higher returns if they are held for a long time. Here are the best small-cap funds, which during a ten-year period increased clients' lump-sum investments up to a factor of 12 times. Keep in mind that past results may not guarantee future ones. (Reference: ACEMF).