Is it the right time to invest in small cap mutual funds?

There is no good or bad time to invest in small cap funds. Small cap companies are very risky but at the same time provide good returns. I would recommend you to include a good mix of large cap and small cap funds in your portfolio. This will help you in maintaining a balanced portfolio.

It would be easier to answer your question if you would have mentioned your mode of investment. Never mind, I will answer for both the types.

Lump Sum- Small cap companies have the highest potential of growth among the mid cap and large cap companies. Thus, when you are investing a lump sum amount in the small cap funds, then make sure that the market valuations are low. Doing so, will help you in buying more number of units at a nominal price and in the future when the market valuations will go high, you can easily sell them at higher prices and enjoy good returns.

SIP- If you have invested in the small cap funds through SIP, then you don’t need to worry about the market timings. Reducing the rupee-cost averaging, SIP may help you in the long term.