Small-cap stocks typically have the highest growth potential as the underlying firms are young and are aggressively seeking to expand. They are more vulnerable than large and mid-caps to a business or economic downturn, making them more volatile. Investors who are interested in investing in small-cap space and may not have the time to research but have the high risk-taking capacity may look to invest in small-cap funds. Small and mid-cap funds generally outperform large-caps on a bull market (Chart 2), but decrease more when the sentiment is bearish.

Small Cap Fund :Such mutual funds pick investment stocks from the class of small caps, which comprises all stocks except for the largest 250 stocks (by market capitalization).
Risk :Moderately High