Small is Beautiful: Invest in small-cap mutual funds

25 Feb, 20243 mins read
Small is Beautiful: Invest in small-cap mutual funds

Table Of Content

  • Our Investment Strategy for Small is Beautiful
  • What do you invest in with Small is Beautiful?
  • Small is Beautiful: Pros and Cons
  • Small is Beautiful: Annualised past returns
  • Who should invest in Small is Beautiful?

Quick Summary

Participate in growing the small businesses . Invest in "Small is Beautiful" a mutual fund portfolio that captures the growth of undervalued companies

Companies classified as small-cap have a market valuation of less than $2 billion. Their great growth potential makes them a potentially profitable investment. Additionally, there's a greater chance that they'll be disruptive and innovative, which could result in big profits for investors. These businesses have the potential to expand quickly because they are frequently just starting out.

Our Investment Strategy for Small is Beautiful

The Small is Beautiful portfolio is a growth-at-a-reasonable-price (GARP) strategy that makes medium- to long-term investments in small-cap firms that have the potential to grow quickly. The portfolio prioritizes businesses with stable profits, robust balance sheets, and fair prices. Additionally, it steers clear of industries that are fragmenting and supports those that are consolidating.

  • Businesses with the capacity to increase profits more quickly than the market.
  • Businesses that are not trading at their true value.
  • Business with robust balance sheets showing sound cash flow and debt levels.
  • Reasonable prices in relation to assets and earnings.
  • Encourages industry consolidation with fewer participants.
  • Avoids industries fragmenting with more players. 

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What do you invest in with Small is Beautiful ?

  • Potent small-cap companies with slight exposure to large & mid-cap for stability.
  • Companies in wealth creation stage with growth potential & robust business models.
  • Emerging startups in sectors like tech, finance, hospitality and capital goods.
  • Mid-cap & large-cap companies to stabilize volatility in changing market conditions.

Small is Beautiful: Pros and Cons


  • These businesses have the capacity to expand quickly.
  • Compared to larger enterprises, they frequently face less competition.
  • Possibility of providing longer-term, better returns than bigger businesses


  • more erratic than bigger businesses
  • Often less liquid than bigger stocks
  • Small-cap companies typically have less information available about them.

Small is Beautiful: Annualised past returns 

  • It has a high risk rating. 
  • Benchmark: NIFTY 500- TRI

Want to know more?
Talk to our advisory team.

They will be happy to help you plan and manage your investments.

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Who should invest with the Small is Beautiful Stack ?

Perfect for long-term capital growth seekers with an aggressive risk tolerance. These investors are prepared to assume greater risk in order to potentially earn better profits. Their long-term wealth growth, financial independence, and leaving a legacy for their kids or grandkids are some examples of their financial objectives. Small-cap firms are a good option for investors who want to diversify their holdings and increase the alpha they can produce.

  • This is ideal for the age group of 18 years upto 45 years
  • This is for investors who delve in aggressive risk investing 
  • Investment horizon of 3+ years
  • You can expect returns that outperform benchmark indices consistently
  • This is ideal for investors with the financial goals of long term wealth creation and generational wealth.


1. What are small cap mutual funds?

Small cap mutual funds invest in companies with a market capitalization (total value of outstanding shares) in the bottom 25% of the Indian stock market. These companies tend to be smaller, younger, and have higher growth potential, but also carry higher risk.

2. Why invest in small cap mutual funds?

- High potential returns: Small cap companies can grow rapidly, leading to potentially higher returns than larger, established companies.
- Diversification: Adding small caps to your portfolio can diversify your holdings and reduce overall risk.
- Early access to promising companies: You can invest in promising companies before they become large-cap giants.

3. What are the risks of investing in small cap mutual funds?

- Higher volatility: Small cap stocks are more susceptible to market fluctuations, leading to potentially larger losses.
- Lower liquidity: It may be harder to buy and sell small cap shares compared to larger companies.
- Limited information: Information about small cap companies may be less readily available, making research more challenging.

disclaimer: the information provided in this blog is for general informational purposes only. it should not be considered as personalised investment advice. each investor should do their due diligence before making any decision that may impact their financial situation and should have an investment strategy that reflects their risk profile and goals. the examples provided are for illustrative purposes. past performance does not guarantee future results. data shared from third parties is obtained from what are considered reliable sources; however, it cannot be guaranteed. any articles, daily news, analysis, and/or other information contained in the blog should not be relied upon for investment purposes. the content provided is neither an offer to sell nor purchase any security. opinions, news, research, analysis, prices, or other information contained on our blog services, or emailed to you, are provided as general market commentary. stack does not warrant that the information is accurate, reliable or complete. any third-party information provided does not reflect the views of stack. stack shall not be liable for any losses arising directly or indirectly from misuse of information. each decision as to whether a self-directed investment is appropriate or proper is an independent decision by the reader. all investing is subject to risk, including the possible loss of the money invested.

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