Is a Small Cap Mutual Fund Good for SIP?

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Is a Small Cap Mutual Fund Good for SIP?

In today’s world, many people are using something called a systematic investment plan to save and grow their money over time. These are a way to put a little bit of money into an investment regularly, like every month. People like Systematic Plan because they help them stay disciplined and invest regularly, even if it’s just a small amount.

Typically, a systematic plan is used with big investment funds that invest in large companies. But they can also be used with funds that focus on small companies, known as small cap mutual funds. These funds invest in smaller companies that have the potential to grow a lot in the future.

Using SIPs with Small cap Mutual funds is a smart idea because it helps investors keep putting money into these funds regularly. Over time, this can lead to good growth because small companies often grow faster than big ones. So, SIPs can be a simple and effective way to invest in small cap mutual scheme and build wealth over time.

Small cap fund known for their potential to deliver high returns over the long term, can indeed be a suitable option for systematic plan. Here’s why:

  • Capitalizing on Compounding Benefits
    Systematic Investment Plan offers investors the opportunity to benefit from the power of compounding. This means that the returns earned on investment are reinvested, allowing them to generate even more returns over time. When you invest regularly in small cap funds through systematic investment, you are essentially allowing your money to grow exponentially.As your investment grows, the returns earned on it also increase, leading to a snowball effect of wealth accumulation. This compounding effect can significantly boost your investment returns over the long term, helping you achieve your financial goals more effectively.
  • Mitigating Timing Risks
    Investing in the stock market can be tricky, especially when it comes to timing your investments. Even experienced investors can struggle to predict when the market will go up or down. However, with a systematic investment plan, you don’t have to worry about timing your investments perfectly. Instead, you invest a fixed amount of money at regular intervals, whether the market is up, down, or sideways. This disciplined approach helps you avoid the temptation to try and time the market, which can often lead to poor investment decisions. By investing consistently over time, you’re able to average out the cost of your investments, which can help reduce the impact of market volatility on your portfolio. In essence, Systematic plan helps you stay disciplined and focused on your long-term investment goals, regardless of short-term market fluctuations.
  • Managing Volatility
    Investing in small cap mutual funds can be a bit risky because their prices tend to go up and down more than larger company stocks. But when you invest in small cap funds through a systematic investment plan, you’re spreading out your investments over time, which can help reduce the impact of these ups and downs. Essentially, you’re not putting all your money into the market at once, so you’re not as affected by short-term changes in the market. Instead, you’re investing a fixed amount regularly, which can help smooth out the bumps along the way. Over time, this approach can make it easier to handle the natural ups and downs of small cap funds, ultimately helping you stay on track with your investment goals.
  • Leveraging Rupee Cost Averaging
    systematic investments plan in small cap funds benefit from rupee cost averaging, a concept where investors buy more units when prices are low and fewer units when prices are high. This strategy allows investors to take advantage of market downturns by acquiring more units at lower prices, potentially enhancing long-term returns.
  • Aligning with Long-Term Goals
    Investing through Systematic investment in small cap mutual funds is a smart move for those with big financial dreams in the long run. Why? Because small cap companies have the potential to really take off over time. By sticking with your systematic investment plan investments for the long haul, you’re giving yourself the best chance to ride out any bumps along the way and reap the rewards of those companies’ growth. It’s all about staying committed to your goals and letting your investments work for you over time

What is the Minimum Amount Required to Start an SIP in a Small Cap Mutual Fund?

The amount needed to start a systematic investment plan in a small cap mutual fund can vary depending on the specific fund and the requirements of the fund house. Typically, mutual fund companies have different minimum investment amounts for systematic investment, which can range from as low as ₹500 to ₹5,000 or more per month. It’s essential to check with the fund house or consult with a financial advisor to determine the minimum investment amount required for the small cap scheme.


In summary, investing regularly in small cap mutual schemes through systematic investment offers several advantages for long-term wealth accumulation. Firstly, the power of compounding allows investors to reinvest their returns, leading to exponential growth over time. Additionally, SIP helps to mitigate timing risks by investing fixed amounts at regular intervals, regardless of market conditions, thus averaging out the cost of investment and reducing the impact of market volatility.

Furthermore, SIP aid in managing the inherent volatility of small cap funds by spreading investments over time, allowing investors to weather short-term fluctuations more effectively. Leveraging rupee cost averaging, Systematic plan investors can take advantage of market downturns to acquire more units at lower prices, potentially enhancing long-term returns.

Aligning systematic investments with long-term financial goals ensures that investors stay committed to their objectives, capitalizing on the growth potential of small cap companies over the years. However, it’s crucial to recognize the risks associated with mutual fund investments and seek guidance from a financial advisor to make informed decisions.

For investors seeking steady wealth accumulation and growth, systematic investment plan in small-cap mutual funds present a viable and prudent investment strategy. contemplating starting a systematic investment plan, considering a small cap mutual fund could be a beneficial option worth exploring further.

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