3 Best Small Cap Funds for 2025: Expert's Pick
Have you ever noticed how some Small Cap Mutual Funds are quietly doing well but still don’t get much attention? The truth is, while the market moves quickly, some funds have yet to be discovered by many. And that’s actually a great thing for you. How? Let's see.
These small cap funds may not be huge yet, but they’re growing fast, are more flexible and can still offer solid returns. If you jump in now, you could see your investment grow over the next few years.
Do you want to learn which funds are worth your time? Let’s take a look at the 3 Best Small Cap Funds for 2025 that could be the right fit for your portfolio.
3 Best Small Cap Funds to Invest in 2025: Analyst’s Choice
Here are the 3 top small cap mutual funds for 2025 to start your systematic investment plan with:
| Fund Name | Launch Date | AUM (Cr) | 3 Year Returns (%) | 5 Year Returns (%) |
|---|---|---|---|---|
| Bandhan Small Cap Fund | 01.02.2020 | Rs.9,234 | 32.26% | - |
| Invesco India Small Cap Fund | 05.10.2018 | Rs.5,837 | 30.41% | 29.73% |
| Tata Small Cap Fund | 02.11.2018 | Rs.9,572 | 32.74% | 30.27% |
Bandhan Small Cap Fund
The Bandhan Small Cap Fund was launched on 1st February 2020. Being a newcomer to the market in its category, it delivered amazing returns of 43.30% in just one year, beating its benchmark returns of 26.96% with good margins. It is a reliable investment option if you are looking for long-term growth while ensuring safety margins to create wealth in a small-cap mutual funds category.
Let's check the performance of the Bandhan Small Cap Fund with the help of a graph:
Now, imagine starting a SIP of Rs.3000 three years ago. Your invested amount would be Rs. 1,08,000 and after adding the profits, your total investments would stand at Rs.1,91,101 as of now.
But that's not all; before starting your systematic investment plan (SIP), check out the current quality parameters of Bandhan small cap fund:
| Fundamental Ratios | Values |
|---|---|
| Sales Growth | 12.89% |
| Earnings Growth | 21.05% |
| Cash Flow | 14.86% |
| PE- Valuations | 19.11% |
The above table shows strong earnings growth of 21.05% and sales growth of 12.89%, indicating that the Bandhan small cap fund invests in fast-growing companies to give investors a steady source of income. Moreover, its relatively lower PE (Price-to-earnings) ratio of 19.11% suggests that the stocks are undervalued, giving investors a good opportunity to buy without paying too high a price.
Invesco India Small Cap Fund
Launched on 5 October 2018, the Invesco India Small Cap Fund has grown to manage Rs.5,837 crore in investments. It has delivered 30.41% returns over 3 years and 30.27% returns over 5 years, making it a good alternative for investors looking for a diversified portfolio with some opportunistic calls in new-emerging industries.
Let’s look at the comparison of its performance against its benchmark returns:
If you had started a systematic investment plan of Rs.3000 that too 5 years ago, the total investment would be Rs.1,80,000. In comparison, your portfolio will show a whopping total of Rs.4,18,139 on today’s date.
Pro Tip: Guessing is fun, but knowing is better. By using the SIP calculator, no more ‘what ifs'.
The next step is to check out the quality of Invesco India small cap fund and for that, you need the following checks:
| Fundamental Ratios | Values |
|---|---|
| Sales Growth | 15.80% |
| Earnings Growth | 16.57% |
| Cash Flow | 33.34% |
| PE- Valuations | 26.60% |
As per the above table, investing in the Invesco India small cap fund will boost your odds of making high earnings, which currently stand at 16.57%. It is a good investment alternative for investors who prefer liquidity, meaning easy buy-and-sell of funds, and are looking for long-term sustainability for their portfolio.
Tata Small Cap Fund
After being introduced in the Mutual Funds industry on 2nd November 2018, it has generated 23.74% returns in three years outperforming the benchmark of 27.1%, the highest of the 3 Best Small Cap Funds For 2025 that you analysed. This small cap mutual fund uses a bottom-up approach to finding strong companies to invest in with a good scope for growth.
You can refer to the below bar graph to see the data more clearly:
Just imagine if you started a SIP of Rs.3000 in this fund 5 years ago, your investment money would be Rs.1,80,000 lakh on which your total gains and final value would be a whopping Rs.4,05,925 lakhs in today’s date.
Let’s look at the below table to see the quality of this small cap fund:
| Fundamental Ratios | Values |
|---|---|
| Sales Growth | 13.76% |
| Earnings Growth | 16.83% |
| Cash Flow | 18.08% |
| PE- Valuations | 29.79% |
The Tata Mutual Fund stands out for its strong growth numbers. It has good earnings growth of 16.83%, sales growth of 13.76%, and cash flow growth of 18.08%. However, it falls slightly behind the other small cap stocks 2025. At the same time, it gives a good investment opportunity if you are willing to pay a premium for high earnings in the future.
Conclusion
In short, these are the 3 best small cap funds to invest in 2025 if you're looking to grow your money over the next few years. These are shortlisted by mutual funds analyst and have shown solid performance, offering you the potential for strong returns. The best strategy for you would be to start an early SIP (systematic investment plan) now and increase your investment amount with time. This way you can observe the performance and lower the market risk associated with small cap funds.
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