SMALL CAP GROWTH FUND

The Small Cap Growth fund invests in emerging companies in the growth sector. Investors approach to investment in small cap growth fun should be to identify small cap growth fund, which invests in the companies with a distinct and sustainable competitive advantage and with long-term growth potential and also with good quality management and strong growth prospects. Small Cap Growth Funds gives the long term capital growth, which mainly invest in the stocks of small growth oriented or emerging growth companies that offer more than average growth for long-term price appreciation. Funds growth mainly depends on value of the stocks which its holding and it should be the stocks of the company believed to be selling below their right price, growth stocks (stocks which are fairly valued and which are expected to grow continuously), or having a both types of stocks .

Investors who choose to invest in small cap growth fund should have a portfolio, which should consist of around 25 per cent of emerging growth companies, which are new companies that may have only one product and where the risks and rewards are higher. The other 75 per cent of the portfolio should made up of established growth companies, which should have more diversified businesses along with offering a good steady performance. Investors should obtain advice from brokers who deals with the smaller companies sector only and should visit the company at least once a year. In the past three years, the fund reported a 63.4 per cent return against an 85 per cent return by the benchmark, which is generally good.

Small Cap Growth Funds that invests in the small or mid-size company stocks involves a greater risk, particularly in the short term, than those which invests in large and more established companies. The funds invested in small companies involve greater risk than other companies because their small size, small lines of products or services, limited monetary resources, and small companies are more sensitive to economic conditions. On the short term basis, stocks of smaller companies experiences more volatile trading and price fluctuations.

But at the same time, small-cap funds have soared. Many indexes of small cap stocks has outperformed the Standard and poor 500 index of large cap shares in each of the past seven years. In a time-phase pattern of performance, the retail investors have largely invested at small cap growth funds recently, using the same which they have removed from large cap funds. There have been outflows from large cap growth in past and that is why now, large cap funds blend with large ,mid and small cap .In the recent past the value discount of large caps funds compared with small caps was all time high.

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