A mutual fund is one of the most popular options nowadays. This investment policy collects money from several people in order to create value in the long run. Funds with small capitalization are especially attractive to active investors who are in search of high yields. There is a fund that established itself as quite successful, that is SBI Small Cap Fund which can provide great opportunities for further development. Now, in this article, let us find out why the SBI Small Cap Fund is a good buy for aggressive investors, and let’s also see it for a moment with the HDFC Small Cap Fund.
What is the SBI Small Cap Fund?
SBI Small Cap Fund is an open-ended equity fund that mainly invests in shares of small-cap companies. Small-cap firms are those firms that have relatively less market capitalization, but they are normally highly valued firms. However, such investments may also be very dangerous because of the fluctuations in the market rates. The fund’s investment objective is an appreciation of capital over the long term by investing in a broad roster of equity securities that are small capitalized and span across numerous industries.
Risks Associated with Small-Cap Funds
Small-cap funds can offer potentially high returns. Still, they are associated with certain risks. The companies in these funds are subject to greater fluctuations and may be more rate-sensitive than other enterprises. This makes it suitable for hi-lo risk-takers or, rather, investors think since the higher the risk, the higher the returns.
Comparing SBI Small Cap Fund and HDFC Small Cap Fund
The SBI Small Cap Fund is one of the most preferred funds. The HDFC Small Cap Fund is also a good fund for investors who wish to invest in small-cap funds. They operate under different approaches in terms of investment and portfolio.
SBI Small Cap Fund, on the other hand, mostly invests in small-cap funds but is more inclined towards slightly larger corporations, making it better than the two.
HDFC Small Cap Fund, however, may take exposure to small companies that have even better growth prospects but with even higher risk.
The two are great funds, so the decision on which to go for depends on one’s risk tolerance and investment plan.
Conclusion
For those investors who are edgy and have a very long time horizon, investing in the SBI Small Cap Fund looks like a good proposition. Although the risks are almost correspondingly high, the potential returns can be that much greater for those who are willing to lock their money away for the long haul. But before investing, do your research properly and take any steps.
Both are good schemes in this category, and one has to decide based on one’s risk appetite whether to go for Axis Small Cap Fund or HDFC Small Cap Fund. Either way, small-cap funds may well be a useful addition to any portfolio designed to deliver high levels of growth.