Planning to invest in small-cap funds? Be prepared for high volatility

Another positive of small-cap stocks is that they have a high correlation with the economic growth cycle

If you had invested in small-cap funds towards the end of 2017 or the start of 2018, there would have been significant erosion in the value of your investments over the past couple of years. The SmallCap Index fell 23 per cent in 2018 and 8 per cent in 2019. Lately, however, there has been recovery. Small-cap funds have delivered an average return of 16.44 per cent over the past six months.

The recent upturn has prompted experts to recommend this category to investors. Investors, however, should know that this category is only for investors who have considerable risk appetite.