Pre-2008 slowdown, the buzz in the equity capital markets of India was small cap funds. People everywhere from the brokers, an occasional pundit on a TV show to advertisers were positioning this as the next big thing. The justification provided was the buoyancy in the equity market of the country. Ordinary people and lay-investors fell for the act without knowing the fact that there is no shortcut to success. Fund houses after fund houses floated mutual funds with focus on small-cap and susceptible people bought into it with much vigor.
Come 2008, the world is infected with the malice of a financial crisis originating from the United States of America। The global financial markets were battered and bruised like never before and so were these funds, projected to make a few quick bucks for their investors and be a catapult for wealth generation.
But, a closer look at the performance of the many small cap funds
masquerading as wealth creators, it can be summed up dismal at best, with the only exception of DSPBR Micro-cap Fund and IDFC Small & Midcap Fund. Even the funds which posted some appealing CAGR (Compounded Average Growth Rate) were not able to do it conventionally, but by significant churning in the portfolio churning ads to the cost for the investor due to brokerage payments
and other transaction charges, thus making the expense ratio of
the fund large।
Another noting point with regards to these small cap funds is that they were generally not stable during the turbulence of the market as they were prone to various market sentiments like no other funds। For investors who want to create wealth, should rely more on mid-cap funds as they have the capability to achieve objectives while at the same time exposing to far less associated risk।
Click here to check out more & recent updates on Mutual Funds.
Come 2008, the world is infected with the malice of a financial crisis originating from the United States of America। The global financial markets were battered and bruised like never before and so were these funds, projected to make a few quick bucks for their investors and be a catapult for wealth generation.
But, a closer look at the performance of the many small cap funds
masquerading as wealth creators, it can be summed up dismal at best, with the only exception of DSPBR Micro-cap Fund and IDFC Small & Midcap Fund. Even the funds which posted some appealing CAGR (Compounded Average Growth Rate) were not able to do it conventionally, but by significant churning in the portfolio churning ads to the cost for the investor due to brokerage payments and other transaction charges, thus making the expense ratio of
the fund large।
Another noting point with regards to these small cap funds is that they were generally not stable during the turbulence of the market as they were prone to various market sentiments like no other funds। For investors who want to create wealth, should rely more on mid-cap funds as they have the capability to achieve objectives while at the same time exposing to far less associated risk।
Click here to check out more & recent updates on Mutual Funds.
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