THINGS TO KNOW BEFORE INVESTING IN SMALL CAP MUTUAL FUNDS_
                     THINGS TO KNOW BEFORE INVESTING 
IN SMALL CAP MUTUAL FUNDS
WEALTHBUCKET: INDIA'S TOP INVESTMENT PORTAL
CONSTRUCTION OF PORTFOLIO
 Small Cap Mutual Funds should be chosen in a way that 
appropriately balances your portfolio. You should aim to invest in 
funds targeting across various sectors of the economy. It is generally 
good practice to steer clear of funds that are concentrated in a very 
limited amount of stocks. The frequency of the trading activity 
ongoing in the fund. Point to be noted for these funds is that the 
most successful funds tend to have a portfolio turnover ratios less 
than 30%.
PAST PERFORMANCE OF THE SMALL CAP MUTUAL 
FUND
 The very recent performance of the fund is generally not a very reliant 
metric for the performance of the fund, no matter how good the 
returns might be. In order to truly assess the performance of the fund, 
you need to witness the performance of the fund over rough and 
bullish times of market lows. In an ideal case, you can look over the 
performance of the fund over the past 5 years and compare with peer 
funds. You can go ahead with investment in a particular fund if you 
feel the performance of the fund is consistent and stable across all 
market conditions and cycles.
CHECK P/E RATIO
 The P/E Ratio or the Price-Earnings Ratios will give u a general idea 
about the fundamental growth potential of the fund. It will also ban 
indicator of the amount your chosen fund will overpay for growth. 
The best small-cap mutual funds having a P/E ratio above 30x are 
considered to be expensive.
FUND HOUSE QUALITY
 Ample research must be carried out in order to pick a fund house 
that has a great record of beating benchmark performances in all 
kinds of market cycles. Ideal fund houses usually have a great 
investment procedure in place in addition to efficient risk 
management strategies. These fund houses have an expert team 
for research and offer good coverage to the investors.
STAY INFORMED ABOUT THE OPTIONS
 Small-Cap mutual funds are essentially a game of choosing between 
risk and reward. It is advisable to invest in a way which allows the 
small-cap fund the flexibility to hold high-cash or even in help in 
investing in mid-cap and large-cap stock. This technique might 
lessen your returns slightly but, you will get to hold more cash for 
yourself and that depends on your willingness to keep your options 
open.
EXPERIENCED FUND MANAGER
 The advice of an experienced and expert fund manager can never 
hurt while choosing a small-cap mutual fund as assessing these 
funds requires qualitative analysis. You should preferably take 
advice from a fund manager who has an excellent performance 
record themselves.
RISK-ADJUSTED RETURNS
 Small Cap funds are very risk-prone that has been well and truly 
established however, some funds can handle risk better than others. 
Within small-cap funds, you should try investing in schemes which 
have a better chance of furnishing better returns with low volatility.