Find the best small-cap fund for 2022 along with the selection process and review the performance of the best small-cap fund of 2021
Let us find the best small-cap mutual fund to invest for 2022 and review the performance of our choice of best small-cap fund for 2021.
So let’s begin.
The year 2021 was quite different because it saw complete optimism. So it was even more challenging for small-cap stocks and predominantly small-cap funds to outperform. Of course, anything and everything was rallying, but that doesn’t mean you can invest in low-quality stock.
Investing in the right stocks and funds in 2021 made sure there is joy in the long run though you may sound foolish in the short term. Voda Idea may have tripled or quadrupled from its low, but Bharti Airtel Investors may be better off in the long term.
The Top Small-Cap Funds for 2022
We will use the process to come to the best small-cap fund for 2022 i– from the 3, 4, and 5-star rated small-cap funds by ValueResearchOnline; we will compare the performance for the past year along with the expense ratio to get the best small-cap fund.
We use 3,4, and 5-star rated funds instead of only 4-star and 5-star rated funds because there is only one fund rated as five stars and only five funds as 4 stars.
Best Small-Cap Fund To Invest in 2022
Small-cap performance depends mainly on selecting good and quality small-cap stocks that can become mid-cap and large-cap over time.
Lower expense ratio and correct allocation to the small-cap stocks can mean the fund can outperform in 2022 when the Nifty and Sensex consolidates. At least, that is the view I have right at this moment. However, it can change as 2022 unfolds with new surprises, including inflation.
Tata Small Cap
Tata small-cap fund has everything one needs to outperform in 2022.
It has a lower expense ratio and has been a stellar performer in 2021. So, I think it should definitely continue its outperformance in 2022 and be part of your portfolio in 2022.
Kotak Small Cap
Small-cap fund performance can vary greatly depending on the stock selection process. So if one wants to opt for diversification, one can opt for more than one small-cap fund.
Moreover, CRISIL ranks Kotak Small Cap Fund as the best small-cap fund for 2022.
And don’t forget to check out the best large-cap fund for 2022 and the best mid-cap fund for 2022.
How Well The Best Small-Cap Fund of 2021 Performed?
I share the series of best funds because we evaluate how we have done in the past. It means either we do well investing or learn from the selection process.
The best small-cap funds of 2021 were:
- Axis Small Cap
- Kotak Small Cap
Both the funds have returned 64% and 80%, respectively, which is impressive. So now I can be a little more confident that the process we are using, ValueResearchOnline and CRISIL, to choose the best small-cap fund for investing is working.
Small-cap investment is all about investing in future leaders. So, it is essential to go with a fund that has been doing it well in the past.
Suppose you have not selected a better performing fund earlier or want to move to a new fund for any other reason (move to regular to direct funds). Then, don’t exit the investment in the old fund. Instead, stop the SIP and let the invested amount remain and grow over time in the past funds. Then, create a new SIP in the new funds.
As always, this isn’t an endorsement of any fund. Instead, the emphasis is on the process. The funds may be doing well now, but use the same process and find the best fund to invest in when you want to invest. Use ValueResearchOnline and CRISIL as and when you want to invest in 2022.
Why Axis and SBI Small cap understand performance last 1 year
Shabbir Bhimani says
I am not able to understand your question.
Samir Nigam says
I’ve one question regarding small cap funds. Is it good time to invest in small cap funds now? As Nifty Small Cap Index PE is high.
Shabbir Bhimani says
One can always argue on lumpsum investment but SIP I think should be fine starting at any point in time.
Any thoughts on Edelweiss Small-cap funds?
Shabbir Bhimani says
Quite good fund and one should keep holding it. The only reason it is not part of my process is because it is still unrated in ValueResearchOnline.