Which is the smartest way to max small-cap fund returns?

Summary: Small-cap funds have delivered blockbuster returns and attracted massive investor flows in recent years. But if you're planning to invest now, a crucial question remains: should you make a one-time investment or go the SIP route? We crunched the numbers across multiple small-cap schemes and found a surprising pattern — one that flips completely when you zoom out to 10 years. Small-cap funds have been the toast of the town for quite a while now. Over the last few years, these funds have delivered exceptional returns, drawing the attention of return-hungry investors. As the small-cap rally picked up steam, so did investor flows, with these funds receiving net investments of over Rs 24,700 crore in the first six months of the year. So, if you, too, are looking to enter the small-cap space now, here’s a more tactical question to consider: should you invest through a lumpsum (one-time investment) or a Systematic Investment Plan (SIP)? Three-year returns Over the last three years, small-cap funds have posted stellar performance. But when we compared SIP vs lumpsum investments across active small-cap schemes, a fascinating pattern emerged. In 22 of the 23 active small-cap funds with a three-year history, one-time investors made more money than SIP investors. In some schemes, the margin has been quite significant, as you can in the table below: Fund Lumpsum (%) SIP (%) Quant Small Cap 28.90 20.92 Nippon India Small Cap 27.08 21.46 Tata Small Cap 26.80 21.40 HDFC Small Cap 27.03