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What precautions should I take while investing in small cap funds?

Dhirendra Kumar talks about the precautions one needs to take while investing in small cap funds

So many websites advise to invest in smallcap funds and midcaps funds through SIP. I understand that they are risky but what precautions should I take as I want to invest in them with a 10-year horizon?

You don't have to take precautions, if you appreciate the fact that they can go down in value. Sometimes your investments can actually go down by 50 per cent to 70 per cent but you should still continue. All you have to do is manage your mind-keep investing the same amount that you have set out, even in the worst of times. Because in this case fortune favors the brave.

Also, with small and mid caps, whatever you read, may not be good enough to appreciate that how dangerous they could be. It is not a very happy situation when you see your Rs 100 going down to Rs 30. But these are the situations where you have to control your anxiety and continue.

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