Mutual funds, also known as unit trusts or collective investment schemes, are an efficient way of investing in securities such as stocks and bonds. They collect money from many investors and invest it in a range of companies, industries, and asset classes. Widespread diversification helps mitigate risks and maximizes returns.

When it comes to mutual funds in India, Nippon Mutual Fund has emerged as a leader, offering an array of investment options to suit various risk profiles. Among its many funds, the Nippon Small Cap Fund has garnered significant attention in the market for its impressive track record.

What is Nippon Small Cap Fund?

As the name suggests, Nippon Small Cap Fund is a mutual fund that focuses on investing in small-cap stocks. In simple terms, companies with a market capitalization of less than Rs. 5000 crores are classified as small-cap companies. These companies usually have tremendous growth potential, and their stocks can yield a higher return on investment. However, they are also volatile and can be more susceptible to market fluctuations.

Launched in December 2010, Nippon Small Cap Fund aims to invest primarily in equity and equity-related securities of small-cap companies to generate wealth in the long run. Its investments span across various sectors, including banking, healthcare, construction, and consumer goods. The fund's investment philosophy prioritizes stocks with promising fundamentals and excellent growth potential, as well as companies with high-quality management teams.

Nippon Small Cap Fund's Performance

Nippon Small Cap Fund has a proven track record of delivering impressive returns. As of 31st August 2021, the fund has delivered a return of 33.3% in the past year, 20.5% in the past three years, 16.2% in the past five years, and 18.7% since inception. The fund has consistently outperformed its benchmark index, the Nifty Smallcap 250 TRI, in all periods.

It is essential to note that mutual funds such as Nippon Small Cap Fund are subject to market risks. The returns earned by the fund in the past may not be guaranteed in the future. Before investing in any mutual fund, it is crucial to evaluate its historic performance, risk factors, and investment style.

Nippon Small Cap Fund's Portfolio

As of 31st August 2021, Nippon Small Cap Fund's portfolio was valued at Rs. 13,587.62 crores. The fund had invested 97.96% of its assets in equity and equity-related securities, with the remaining 2.04% in debt and money market instruments. The fund's portfolio was diversified across a range of sectors, with the top five sectors being chemicals (9.8%), construction (9.4%), consumer goods (9.1%), services (8.8%), and healthcare (8.6%).

The top ten holdings of Nippon Small Cap Fund constitute 32.6% of its portfolio. The largest holding is Clean Science and Technology Ltd, a chemicals company that accounts for 7.8% of the fund's portfolio. Other top holdings include Ircon International Ltd, Suven Pharmaceuticals Ltd, Mastek Ltd, and Amber Enterprises India Ltd.

Advantages of Nippon Small Cap Fund

Nippon Small Cap Fund offers several advantages to investors. Firstly, the fund's focus on small-cap companies gives investors exposure to markets with high growth potential. Secondly, the fund's experienced and professional management team follows a disciplined investment approach, investing in fundamentally strong companies with excellent growth potential and quality management. Thirdly, the fund's diversified portfolio helps mitigate concentrated risks and minimize volatility.

Other Mutual Fund Alternatives

Apart from investing in equity mutual funds like Nippon Small Cap Fund, investors can also consider investing in debt mutual funds. Debt mutual funds invest primarily in fixed-income securities such as corporate bonds, government securities, and money market instruments. These funds are ideal for investors with low-risk appetites and looking for stable returns.

Some of the best debt mutual funds offered by Nippon Mutual Fund are Nippon India Short Term Fund, Nippon India Credit Risk Fund, and Nippon India Strategic Debt Fund. These funds offer attractive returns and are actively managed by seasoned fund managers. It is essential to note that debt mutual funds are also subject to market risks such as interest rate risks and credit risks.

Conclusion

Nippon Small Cap Fund is a popular mutual fund with excellent historical performance that investors can consider to get exposure to high-growth markets and potentially higher returns. However, it is crucial to note that investing in mutual funds involves risks, and it is crucial to thoroughly evaluate the fund's past and evaluate the fund's objectives, risk factors, and investment style before investing. Investors may also wish to consider other options such as debt mutual funds.