3 cheapest small-cap funds that tripled ₹1 lakh to over ₹5 lakh in 5 years
Small-cap mutual funds have gained popularity among aggressive investors looking for high returns. While these funds carry higher risk, they also offer the potential for outsized gains over the long term. What makes them even more attractive is when they combine top-tier performance with low expense ratios. In the last five years, a few small-cap funds have done just that—delivering over 5x growth while keeping costs impressively low.
Low-cost small-cap high-growth winners Small-cap schemes are renowned for their wealth creation potential, especially for those who have a higher risk tolerance and long-term view. Add to that when these schemes deliver market beating with cost ratios that are low. Three small-cap schemes in the last five years have not only increased investor wealth more than five times—converted ₹1 lakh to over ₹5 lakh—but also managed costs impressively in check.
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Tata Small Cap Fund: Steady growth with lowest fees The Tata Small Cap Fund has been the darling with its steady returns and one of the lowest expense ratios in the peer group. Over the past five years, it has delivered an annualised return of around 38.9%, converting ₹1 lakh into about ₹5.19 lakh. Its strict stock-picking strategy and focus on high-growth small stocks have helped it to beat benchmarks at economical prices, winning the hearts of seasoned investors.
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Bandhan Small Cap Fund: Highest returns with lowest cost This fund proved to be one of the best performers both on returns as well as on efficiency. It has delivered a staggering 40.1% five-year annualised return—transforming ₹1 lakh into nearly ₹5.43 lakh. With low expense ratio and focused investment in quality small-cap stocks, it has outperformed its peers. The success of this fund is largely owing to its ability to spot early winners.
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Invesco India Smallcap Fund: Balanced value and growth The Invesco India Smallcap Fund also has performed wonderfully, returning nearly 37.9% annually in the last five years. ₹1 lakh invested would be well over ₹5 lakh now. Its strategy is one of identifying fundamentally strong small-cap businesses with long-term potential. With a low cost ratio and stable management philosophy, the fund has been one of the most popular among those who seek a stable small-cap achiever.
Why these funds stand out Each of the three funds combines low expense ratios and high returns, a best-of-both-worlds scenario for creating long-term wealth. Their 5-star ratings reflect a history of consistency, quality of fund, and risk-adjusted return. By holding their expense ratios at or near historical lows, these funds leave more of your gains in the market, compounding over time—especially important in a volatile market such as small caps.
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Things to consider before you invest Even with robust previous returns, small-cap funds are riskier thanks to market fluctuations and the volatile nature of small companies. Small-cap funds are ideal for those who invest for a minimum of five to seven years. It is also advisable to invest through systematic investment plans (SIPs) to smoothen market movements. Check your investment goals and risk tolerance before investing part of your portfolio in small-cap funds.
