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Monthly SIP of 10,000 turns to up to 7 lakh in 3 years in 4 equity funds

With this strategy in mind, we have chosen 4 small cap funds that, in addition to being 4-star by Value Research, have grown a monthly SIP of  ₹10,000 to over  ₹6 lacs in just three years. (istockphoto)Premium
With this strategy in mind, we have chosen 4 small cap funds that, in addition to being 4-star by Value Research, have grown a monthly SIP of 10,000 to over 6 lacs in just three years. (istockphoto)

  • In order to reduce the risk associated with equity mutual funds, it is preferable to invest over the long term through a systematic investment plan (SIP).

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According to SEBI regulations, small-cap funds must invest at least 65 per cent of their capital in small-cap firms with a market size of less than 5,000 Cr. Small-cap funds have a larger risk-reward ratio than large- and mid-cap funds, making them an equity mutual fund type that financial gurus always favour for long-term investments. In the long run, small-cap funds may outperform large-cap and mid-cap funds since small companies have a higher potential to achieve their strong growth plans, but there is a significant risk involved since small-cap funds are most vulnerable to a gloomy market and an unstable economy. In order to reduce the risk associated with equity mutual funds, it is preferable to invest over the long term through a systematic investment plan (SIP). With this strategy in mind, we have chosen 4 small-cap funds that, in addition to being 4-star by Value Research, have grown a monthly SIP of 10,000 to over 6 lacs to 7 lacs in just three years. 

Quant Small Cap Fund - Direct Plan

Quant Small Cap Fund - Direct Plan was established on January 1, 2013, and as of this writing, Value Research has awarded the fund a 4-star rating. As of June 30, 2022, Quant Small Cap Fund Direct Plan-Growth had assets under management (AUM) at 1711.78 crores, and as of August 4, 2022, the fund's NAV was 132.38. The fund's 0.62 per cent expense ratio is lower than that of the majority of other funds in the same category. Since its introduction, Quant Small Cap Fund Direct Plan-Growth has produced returns of an average of 15.21% per year and 0.17 per cent over the past year. 

A monthly SIP of 10,000 placed in this fund three years ago would have converted into approx. 7.18 lakh at this point, based on the fund's trailing three-year performance of 48.97 per cent. With a return of 20.96% over the past five years, the fund, a monthly SIP of 10,000 would have grown to almost 13.49 lakh. The fund has produced a trailing return of 17.33 per cent over the past seven years, meaning that a SIP of 10,000 per month made seven years ago would currently be worth around 20.24 lakh. 

The fund holds a sector allocation of Consumer Staples, Services, Financial, Healthcare, Metals & Mining industries and the fund's top 5 holdings are in ITC Ltd., IRB Infrastructure Developers Ltd., ICICI Bank Ltd., Hindustan Copper Ltd., Linde India Ltd.. The fund invests 98.95% of its assets in domestic equity markets, of which 25.54% are large-cap companies, 8.26% are mid-cap stocks, and 65.15 % are small cap stocks.

Edelweiss Small Cap Fund - Direct Plan

The fund was established on February 7, 2019, and as of right now, Value Research has awarded it a 4-star rating. The assets under management (AUM) of Edelweiss Small Cap Fund Direct - Growth were valued 1084.85 Crores as of June 30, 2022, while the fund's NAV was 25.76 as of August 4, 2022. The fund's expense ratio of 0.57 per cent is lower than that of the majority of other funds in the same category. 

Since its introduction, Edelweiss Small Cap Fund Direct has generated average annual returns of 31.15 per cent, with a 1-year return of 11.75%. The fund has produced a trailing return of 37.03 per cent over the past three years, which indicates that an investment of 10,000 placed as a SIP per month three years ago has now grown to around 6.08 lakh. The fund has investments in the Capital Goods, Financial, Materials, Services, and Chemicals industries. 

Its top 5 holdings are Brigade Enterprises Ltd., GMM Pfaudler Ltd., Max Healthcare Institute Ltd., Persistent Systems Ltd., and JB Chemicals & Pharmaceuticals Ltd. The fund invests 96.72% of its assets in Indian companies, of which 4.52% are large-cap companies, 32.31% are mid-cap stocks, and 50.91% are small-cap stocks.

Kotak Small Cap Fund - Direct Plan

The fund was founded on 01-January-2013 and the fund currently holds a 4-star rating from Value Research. As of June 30, 2022, Kotak Small Cap Fund Direct-Growth had assets under management (AUM) totaling Rs. 7079.71 Crores, and as of August 4, 2022, the fund's NAV was Rs. 183.41. The fund's 0.59 per cent expense ratio is lower than that of the majority of other small-cap funds. Since its introduction, Kotak Small Cap Fund Direct-Growth has generated returns of an average of 20.56 per cent per year, and 8.94% over the past year. 

A SIP of 10,000 made in this fund 3 years ago would now have grown to about 6.17 Lakh according to the fund's trailing return of 38.36% over the previous 3 years. The fund holds a sector allocation of Materials, Consumer Discretionary, Chemicals, Metals & Mining, Capital Goods industries and the fund's top 5 holdings are in Century Plyboards (India) Ltd., Carborundum Universal Ltd., Sheela Foam Ltd., Galaxy Surfactants Ltd., Ratnamani Metals & Tubes Ltd..

The fund invests in Indian companies to the tune of 92.9 per cent, with 2.89 per cent of that amount invested in large-cap companies, 21.44 per cent in mid-cap stocks, and 68.57 per cent in small-cap stocks.

Nippon India Small Cap Fund - Direct Plan

The fund was established on January 1, 2013, and as of this writing, Value Research has awarded it a 4-star rating. As of June 30, 2022, Nippon India Small Cap Fund Direct- Growth had assets under management (AUM) of 18,358 Crores, and as of August 4, 2022, the fund's NAV was 94.19. The expense ratio for the fund is 1.04 per cent, which is much higher than that of the majority of other products in the same category. 

Since its inception, Nippon India Small Cap Fund Direct- Growth has generated returns of 25.08 per cent on an average per year and 12.52 per cent over the past year. A monthly SIP of 10,000 begun in this fund three years ago would now have grown to over 6.23 Lakh based on the fund's trailing three-year performance of 35.73 per cent. The top five holdings of the fund are TI Financial Holdings Ltd., Grameen Financial Services Pvt Ltd., NIIT Ltd., KPIT Engineering Ltd., and HDFC Bank Ltd. 

The fund includes sector allocations for the capital goods, chemicals, financial, consumer staples, and technology industries. The fund invests 96.76 per cent of its assets in Indian companies, with 66 per cent of its holdings in small-cap companies, 12.38 per cent in large-cap stocks, and 18.38 per cent in mid-cap stocks.

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