Being a newbie can be challenging in the large and dynamic investing world, where many possibilities are available. Small-cap stocks stand out as a compelling option for prospective growth and returns among the wide range of choices available to investors. However, exploring this area requires a sophisticated knowledge of the many financial tools at your disposal. 

The Quant Small Cap Fund is one such vehicle that has grown in prominence due to its ability to generate significant profits. This article will talk about the fundamentals of Small Cap Fund by Quant mutual fund, illuminating the essential ideas, approaches, and factors that will aid you in navigating this fascinating but complex area of the financial markets. 

This article will give you valuable insights into small-cap investing through a quantitative perspective, whether you’re a newbie investor trying to get started or simply seeking to enhance your knowledge.

What is a Quant Small Cap Fund?

Quant small-cap funds are open-ended equity schemes invested in small capital portfolios of equity shares. People looking for capital appreciation should invest in Quant small-cap fund. These funds are managed by Quant money managers and are known for significant growth potential. These funds offer long-term growth opportunities by investing in small capital companies.

The funds are available to the investors at NAV prices. Two plans are available to invest in these funds – regular plan and direct plan. 

1. The regular plan is for investors to purchase funds through a distributor under any specific scheme.
2. Direct plan – This is for people who buy the units directly from the fund, not from any distributor. They are required always to invest 65% of their assets in small-cap stocks.

Quant small cap fund has most of its money invested in services, financials, healthcare, energy, and metals and mining sectors. The top five fundings for the quant small cap fund are Jio Financial Services Ltd, Reliance Industries Ltd, IRB Infrastructure Developers Ltd, Bikaji Foods International Ltd, and Reserve Bank of India.

Characteristics of Quant Small Cap Fund

Here are a few things you should be aware of before investing in Quant small cap fund:

1. Options under plans – Growth and income distribution cum capital withdrawal
2. Entry Load – Nil
3. Exit Load – For any fund redemption or switch within one year from allotment – 1% (irrespective of the amount); after one year from allotment – Nil (regardless of the amount).
4. Minimum application amount – INR 5,000 and multiples of INR 1 after that.
5. Minimum additional purchase amount – INR 1,000 and multiples of INR 1 afterwards.
6. Minimum redemption size – INR 1,000 or the unit balance (whichever is less).

Is it Worth Investing in the Quant Small Cap Fund?

Many people ask this question – should I invest in Quant small cap fund? The fund was not a great option until 2020, although it entered the market in 1996. But effective 2020, it is considered to be a top-rated fund. 

Moreover, the fund also recorded a growth of 35 times in the last three years. It has recorded an annual return of 58% in the previous three years among 361 equity funds.

So, before investing, people should remember a few things:

1. These funds invest in small capital stocks.
2. These schemes are very volatile and risky.
3. Quant small-cap funds are suitable for aggressive investors who can take risks.
4. These funds are suitable for people looking to invest for the long term. This is because long-term investments often balance out the risk and volatility factors.
5. People with short investment plans should avoid investing in Quant small-cap funds.

Moreover, investors should remember that the fund’s strategy differs significantly from others. The fund follows an in-house Quant-based approach with its frameworks. They are free to purchase and sell equities by their model, and the fund house is unfazed by frequent portfolio churning. The most essential features of Quant small-cap fund’s framework are:

1. Valuation Analysis – Knowing and understanding the core difference between value and price.
2. Liquidity Analysis – Comprehending the money flow across different asset classes.
3. Risk Analysis – Recognising what prompts specific behaviours and responses from market players
4. Time Analysis – The knowledge of understanding the cycle governs the above three dimensions or analysis.

The fund house is also quite different with its approach towards Quant small-cap funds. Furthermore, it is also recommended not to consider the fund’s past performance when investing in Quant small cap fund as the past performance may only sometimes repeat itself.

How is Tax Calculated for Quant Small Cap Funds?

When you invest in Quant small cap fund, you should also check how the taxation works. There are two ways the tax is calculated:

1. Capital Gains Tax

Capital gains refer to when investors sell their mutual fund units. In the case of a Quant small cap fund, if the units are sold after one year of investment, all gains up to INR 1 lakhs in the financial year are exempted from taxation. The tax rate is 10% if the total revenues in the financial year exceed INR 1 lakh.

On the other hand, all gains, regardless of size, are taxed at 15% if the units are sold within a year of the investment date. If investors still own the units, they won’t owe any taxes either.

2. Dividend Tax

All dividends received from the Quant small-cap funds are added to the investor’s income and further taxed per their tax slabs. Before releasing the dividend, the fund house will deduct a TDS of 10% if the dividend income exceeds INR 5,000 in a fiscal year.

Conclusion

In conclusion, while learning the fundamentals of Quant Small Cap Funds can be a helpful first step towards creating a diversified and potentially lucrative portfolio, investments may initially seem complicated and intimidating. 

Investors can embark on wealth development and financial progress by integrating quantitative tactics and concentrating on the exciting potential given by small-cap stocks. Investing carries dangers, so doing extensive research, speaking with financial experts, and monitoring market trends is essential.