Small Cap Investing Glossary

The extra return a fund generates above its benchmark index. A positive Alpha means the fund manager added value beyond what the index gave. What makes an actively managed fund worth its cost. Compare Alpha across funds →

The total amount of money a mutual fund currently manages on behalf of all its investors. Very large AUM (₹50,000+ Cr) can limit a small cap fund's ability to take meaningful positions in truly small companies. See AUM of top funds →

Measures how much a fund moves relative to its benchmark. A Beta of 1.2 means the fund rises or falls 20% more than the benchmark. Higher Beta = higher volatility. Small cap funds typically have Beta above 1.

The index a fund measures its performance against. For small cap funds, common benchmarks are Nifty Smallcap 250 or BSE Small Cap Index. A fund that consistently beats its benchmark over 5-10 years is adding real value.

The annualised return of an investment over a period assuming profits are reinvested. If ₹1 lakh grew to ₹2.59 lakh in 10 years, the CAGR is 10%. Used to compare returns across different time periods. See historical small cap CAGR →

The total value of your investment at any given point. For example — "I want to build a corpus of ₹1 crore for retirement." The corpus grows as your investment earns returns and you keep investing.

The peak-to-trough fall in a fund's value during a market correction. A fund that fell from ₹100 NAV to ₹60 NAV experienced a 40% drawdown. Lower maximum drawdown indicates better risk management. Learn about small cap drawdowns →

A mutual fund plan where you invest directly with the fund house, cutting out the distributor. Has a lower expense ratio (0.5-1% less than Regular plan) since no commission is paid. Over 20 years this difference can be worth lakhs. Best for self-directed investors.

The annual fee charged by the fund house as a percentage of your total invested amount. Deducted daily from NAV — you never pay it directly. Direct plans have expense ratios of 0.3-0.8%. Regular plans 0.8-1.8%. Lower is always better. Compare expense ratios →

A fee charged when you redeem your investment before a certain period — typically 1% if you sell within 1 year. After 1 year, most small cap funds charge no exit load. Designed to discourage short-term trading.

A unique account number assigned to you by a mutual fund house when you invest. Similar to a bank account number. If you invest in 3 different funds from the same AMC, you may have 1 folio covering all 3 investments.

Income Distribution cum Capital Withdrawal. The fund periodically pays out a portion of profits to investors. Unlike bank dividends, mutual fund IDCW payouts reduce the NAV by the same amount. For long-term small cap investing, the Growth option is almost always better as IDCW is taxed as income.

Profit from equity mutual fund units held for more than 1 year. In 2026, LTCG up to ₹1.25 lakh per year is tax-free. Above ₹1.25 lakh, 12.5% tax applies without indexation. Read the full tax guide →

The risk that a fund cannot sell its holdings quickly without moving the price significantly. Small cap stocks are less liquid than large cap — during market crashes, small cap funds may struggle to sell stocks at fair prices, amplifying losses.

Share price multiplied by total shares outstanding. Determines if a company is classified as small, mid or large cap by SEBI. Companies ranked 251st and below by market cap are classified as small cap. Updated twice yearly by AMFI.

A SEBI registered professional who helps you invest in mutual funds and provides ongoing portfolio guidance. MFDs earn a commission from the fund house (included in the Regular plan expense ratio). A good MFD actively reviews and rebalances your portfolio.

The daily price per unit of a mutual fund scheme. Calculated as (total assets - liabilities) ÷ total units. When you invest ₹5,000 in a fund with NAV of ₹50, you get 100 units. NAV is declared once a day after market close. See live NAV of all 19 funds →

Returns calculated across all possible overlapping time periods rather than one fixed start and end point. Far more accurate than point-to-point returns. A fund with high average rolling returns over 7 years is consistently strong — not just lucky in one period. See rolling returns →

A mutual fund plan where you invest through a SEBI registered Mutual Fund Distributor. Has a higher expense ratio than Direct plan because it includes distributor commission. Worth choosing if your MFD actively manages and rebalances your portfolio.

The benefit of investing a fixed amount regularly through SIP. When markets fall, your fixed amount buys more units. When markets rise, it buys fewer. Over time this averages out your purchase cost, reducing the impact of market volatility. Learn SIP strategy →

Companies ranked 251st and beyond by market capitalisation as defined by SEBI. These are relatively small businesses — often less well-known, with higher growth potential but also higher risk compared to mid and large cap companies. Learn more →

A method of investing a fixed amount in a mutual fund at regular intervals (usually monthly). The auto-debit happens on a chosen date. SIP builds discipline, benefits from rupee cost averaging and is ideal for small cap's high volatility. SIP strategy guide →

Profit from equity mutual fund units held for less than 1 year. Taxed at 20% on the full gain with no exemption. Much higher than LTCG — a strong reason to hold small cap investments for at least 1 year before redeeming. Full tax guide →

Return earned per unit of risk taken. A Sharpe Ratio of 1.5 means the fund delivered 1.5 units of return for every unit of risk. Higher is better when comparing funds in the same category. A fund with lower returns but much lower risk may have a higher Sharpe ratio. Compare Sharpe Ratios →

Similar to Sharpe Ratio but only penalises downside volatility — not upside. A fund that goes up sharply and down mildly will have a higher Sortino than Sharpe. More relevant for small cap funds where upside spikes are desirable. Compare Sortino Ratios →

A SIP that automatically increases your monthly investment by a fixed % each year — typically 5-15%. Designed to grow your investment in line with salary increases. The compounding impact of a step-up SIP over 15+ years can be 2-3x vs a flat SIP. See Step-Up SIP calculations →

A strategy to invest a lumpsum safely into volatile funds. Park the money in a liquid fund, then set up an STP to transfer a fixed amount each month into the small cap fund. Gets the benefit of rupee cost averaging for lumpsum investments.

Redeeming mutual fund units with LTCG gains up to ₹1.25 lakh each financial year to use the tax-free exemption, then reinvesting immediately. Completely legal. Resets your cost basis higher annually, reducing the taxable gain in future years. How to do tax harvesting →

How much a fund's NAV fluctuates over time. High volatility means large swings up and down. Small cap funds are among the most volatile in the mutual fund universe — they can fall 40-50% quickly but also rise 60-80% in recovery. Long investment horizon is essential.

Extended Internal Rate of Return — the most accurate way to measure returns on SIP investments where money is invested at different times and in different amounts. More accurate than simple CAGR for regular investments. Most portfolio tracking apps calculate XIRR automatically.