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As the Small Cap Fund craze continues, investors should now preferably deploy money in these funds in a staggered manner through SIPs or systematic transfer plans (STPs).
Experts say that one should lumpsum investments as valuations are turning expensive and the Nifty Smallcap 250 Index is at its all-time high.
The Nifty Smallcap 250 Index has given returns over 30% returns since April this year, leading to a surge in small-cap fund inflows.
While small-cap funds can work better for investors with a long-term perspective, they must be watchful of the volatility.
Moreover, investors must not go overboard on small-cap funds as these can have an impact on the overall portfolio and a blended approach will work well for all times.
However, if you are planning to deploy large sums of money as lumpsum, the valuations are on the higher side and you might want to stagger the same via a 6-12 month weekly STP, says Kumar.
Nirav Karkera, Head of Research at Fisdom, also says investors should deploy money in small-cap funds in a staggered manner. STPs and SIPs are the preferred ways to invest in them.
Karkera further says that small-cap stocks are not suitable for risk-averse investors seeking linearity in performance.
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