Small Cap Fund — Mutual Fund Term Explained

A fund investing at least 65% in companies ranked 251+ by market cap. Highest return potential but most extreme drawdowns. Requires 10+ year horizon.

Small cap funds invest at least 65% in companies ranked 251st and below. These are typically smaller, younger companies with high growth potential but also higher business risk.

Small caps have delivered the highest long-term returns but also the most extreme drawdowns — can fall 60-70% in crashes.

Related terms

• Mid Cap Fund — A fund investing at least 65% in companies ranked 101-250 by market cap. Higher return potential than large cap but significantly more volatile.
• Large Cap Fund — A fund investing at least 80% in the top 100 companies by market cap. Lower volatility with stable blue-chip exposure.
• Drawdown — The percentage decline from a fund's peak NAV to its subsequent trough. Shows how badly a fund fell from its high point.
• Maximum Drawdown — The largest peak-to-trough decline in a fund's history. Represents the worst-case loss an investor could have experienced.

Browse the full mutual fund glossary, or see this concept in action in the fund screener.