₹10,000 Monthly SIP in a Small Cap Fund: 3, 5, and 10 Year Scenarios

Small cap mutual funds are open-ended equity schemes that invest at least 65% of their total assets in equity and equity-related instruments of small-cap companies. If you had started a ₹10,000 monthly SIP in a small cap mutual fund scheme, your investment could have potentially grown to approximately ₹4.3 lakhs* in 3 years, ₹8 lakhs* in 5 years, or ₹23 lakhs* in 10 years, assuming an annual return of 12%. 

*These figures are only illustrative estimates.

A Systematic Investment Plan (SIP) allows investors to gain market exposure “gradually” rather than committing a large amount of capital upfront. Given the high volatility associated with small-cap stocks, some investors prefer spreading their investments across monthly instalments instead of investing a lump sum at once. 

But how much could a ₹10,000 monthly SIP in a small cap fund potentially accumulate over time? This article provides illustrative estimates for 3, 5, and 10 years, using different assumed annual rates of return. 

But firstly, let’s learn what a small cap fund is.

As per SEBI regulations, a small cap fund is an open-ended equity mutual fund scheme that invests at least 65% of their total assets in equity and equity-related instruments of small-cap companies, which are ranked 251st and beyond in terms of full market capitalisation. 

The remaining portion (up to 35% of total assets) may be invested in equity and equity-related instruments of companies outside the small-cap category, debt and money market instruments, and other permitted securities.

It is worth mentioning that, generally, small-cap companies have a smaller market value than large-cap and mid-cap companies and may be at an earlier stage of business growth. They may also have lower trading liquidity and greater price volatility.

A small cap fund's potential returns depend on the performance of its underlying holdings and the fund manager's investment decisions.

Suppose you had started a ₹10,000 monthly SIP in a small cap equity mutual fund scheme for 3 years. Over this period, the total amount invested would have been ₹3,60,000 (₹10,000 per month x 12 months x 3 years).

Depending on the assumed annual rate of return, the investment could have potentially grown to the following amounts:

Suppose you had started a ₹10,000 monthly SIP in a small cap mutual fund scheme for 5 years. Over this period, the total amount invested would have been ₹6,00,000 (₹10,000 per month x 12 months x 5 years). 

Depending on the assumed annual rate of return, the investment could have potentially grown to the following amounts:

Suppose you had started a ₹10,000 monthly SIP in a small cap mutual fund scheme for 10 years. Over this period, the total amount invested would have been ₹12,00,000 (₹10,000 per month x 12 months x 10 years). 

Depending on the assumed annual rate of return, the investment could have potentially grown to the following amounts:

Note: As per AMFI Best Practice Guidelines dated 10th September 2024, the mean of 10-year rolling returns between 01/06/14 and 31/05/24 for Sensex is 12.62% CAGR, Nifty is 12.42% CAGR & Nifty 500 is 12.80% CAGR. Past performance may or may not be sustained in future and is not a guarantee of any future returns.

So now you know what small cap funds are and how much you could potentially accumulate through a ₹10,000 monthly SIP in them. If we were to revise, small cap funds are open-ended equity schemes that predominantly invest in small-cap companies.

At an assumed annual return of 12%, a ₹10,000 monthly SIP could have potentially accumulated approximately ₹4.30 lakhs* in 3 years, ₹8 lakhs* in 5 years, and ₹23 lakhs* in 10 years. 

*These figures are illustrative estimates. Actual outcomes depend on market performance and the scheme’s returns over the investment period.

For more information, you can visit www.tatamutualfund.com/deshkarenivesh. The Investor Service Centre of Tata Asset Management Pvt. Ltd. is located at Mulla House, Ground Floor, 51, M.G. Road, Near Flora Fountain, Mumbai – 400 001, Maharashtra. The office hours are Monday to Friday, 9:00 AM to 5:30 PM. For assistance, you can also call (022) 6282 7777 from Monday to Saturday, 9:00 AM to 5:30 PM, or email service@tataamc.com

1. What happens to a small cap SIP during a market crash?

During a market crash, the value of small cap stocks may decline. Consequently, the accumulated value of the SIP may also fall. Note that continuing a SIP does not prevent losses, and investors should assess their investment horizon and risk tolerance before making decisions.

2. Should I increase my ₹10,000 monthly SIP in a small cap fund every year?

Increasing a SIP annually (also known as a Step-up SIP) may potentially build a larger corpus. However, the increase should align with your income growth, financial commitments, and investment goals. 

Besides, a higher SIP can also increase exposure to market risk, particularly when the additional amount goes into small cap funds.

3. Is it better to invest ₹10,000 monthly in one small cap fund or split it across multiple funds?

Investing in multiple small cap funds may not improve diversification if their portfolios hold similar stocks. This is known as “portfolio overlap”, where two or more mutual fund schemes invest in the same companies. 

Potentially, investors can assess the monthly portfolio disclosures and factsheets of different schemes to compare their:

• Top holdings
• Sector allocations, and 
• Investment strategies. 

Selecting funds with distinct investment approaches may reduce unnecessary duplication.

An Investor Education and Awareness Initiative by Tata Mutual Fund. 

To know more about KYC documentation requirements and procedure for change of address, phone number, bank details, etc., please visit: https://www.tatamutualfund.com/deshkarenivesh 

Please deal only with registered Mutual Funds, details of which can be verified on the SEBI website under ‘Intermediaries / Market infrastructure institutions.’

All complaints regarding Tata Mutual Fund may be directed to service@tataamc.com and/or https://scores.sebi.gov.in/ (SEBI SCORES portal) and/or https://smartodr.in/login 

Nomination is advisable for all folios opened by an individual, especially with sole holding, as it facilitates an easy transmission process. 

This communication is a part of the investor education and awareness initiative of Tata Mutual Fund.