Small-cap funds can rise fast and fall just as quickly. The last year has been difficult for the category, with several schemes posting weak or negative returns. That does not change the broader picture. Small-caps need time to deliver. While the category can carry a higher risk, those who stay invested tend to be rewarded. A five-year view gives a truer sense of how a fund performs across cycles.

Look beyond the past 12 months, and the numbers improve sharply. Several small-cap schemes have generated annualised returns between 31% and 36% over five years, well above their benchmarks. Such compounding can meaningfully lift long-term returns.

How to choose the best small-cap mutual fund in 2025

Small-cap funds move through cycles. To assess them properly, you can focus on a few core met

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