In the realm of financial investment, the inherent risk associated with any financial decision is an integral aspect that every investor must consider. Each investor has a unique risk tolerance, making it crucial to accurately assess the potential risk in any given investment. A myriad of tools exist to facilitate this risk assessment process, one of the most prominent being the Value at Risk (VaR). This post aims to provide an overview of VaR, its functionality, and its role in the context of mutual funds.

Investing in mutual funds is one of the most popular ways to build wealth over the long term. However, like any investment, mutual funds come with their share of risks. It is essential to understand and assess these risks to make informed investment decisions. This article aims to shed light on some of the key risk assessment tools for mutual funds - standard deviation, semi-deviation, value at risk, average drawdown, and maximum drawdown. The calculated values of all these risk parameters are available on the website.

Small cap mutual funds, as defined by SEBI and AMFI, primarily invest in companies ranked 251st onwards in terms of market capitalization. They offer high growth potential as they invest in smaller, growing companies that could yield high returns. Moreover, they can uncover undervalued stocks that are often under-researched. Small-cap funds also bounce back quickly from economic downturns due to their adaptability. However, they have drawbacks like high volatility, and liquidity risk, and require a longer investment horizon. Although they carry significant risk, with informed decision-making, a clear understanding of the risk-reward paradigm, and guidance from skilled fund managers, they can contribute significantly to wealth creation.