• Business News
  • Insurance
  • Saving
  • Share Market 5Paisa
  • Loan
  • Mutual Funds
  • Investment
    • हिन्दी
    • తెలుగు
    • मराठी
    • বাংলা
    • ગુજરાતી
    • ಕನ್ನಡ
  • Close
  • Daily Show
    • 2+2=5
    • Take it Easy
    • Red Alert
    • Formula Guru
    • Money Gyan
    • Money Central
    • Money time
    • Jhatpat
  • Weekly Show
    • Money Comics
    • Economicom
    • Realty Check
    • Smile and pay
    • Money Tales
    • Spend Wise
    • Companynama
  • Insurance
  • Savings
  • Share Market 5Paisa
  • Loan
  • Crypto coindcx
  • Investment
  • Mutual Funds
  • Real Estate
  • Tax
  • Exclusive
  • Home » News » Investment » Should you invest in a largecap, midcap or smallcap mutual fund?

Should you invest in a largecap, midcap or smallcap mutual fund?

Deciding on a mutual fund category primarily depends on investor's financial goal, time horizon, risk-taking ability and resources

  • Harsh Chauhan
  • Updated On - July 1, 2021 / 04:13 PM IST
Should you invest in a largecap, midcap or smallcap mutual fund?
The AUM of mutual fund industry grew by a whopping 41% from Rs 22.26 lakh crore in FY2020 to Rs 31.43 lakh crore in FY2021.

A strong rally in stock markets and surging valuation is making it difficult for investors to cherry-pick stocks at the right valuations which is why they are turning to mutual funds as an alternative. This quiet is evident from the fact that open-ended equity mutual funds saw net inflows of Rs 10,082.98 in the month of May 2021 highest in 14-months. Even the SIP contribution has been rising. According to data released by the Association of Mutual Funds in India (AMFI) the contributions under the systematic investment plan (SIP) touched their lifetime highs of Rs 8,818.90 crore in May 2021 versus Rs 8,596.25 crore witnessed in April 2021.

If you are looking to invest in mutual funds but confused about the category you should invest in, here’s some help.

Financial goals

As per most investment pundits deciding a mutual fund category primarily depends upon one’s investment goal, time horizon, risk-taking ability and resource position. “If you’re investing for a very long-term, for example, if you’re planning for retirement or education, something like that, when you when you have 10 years or more, then definitely you can allocate a little part of the corpus in smallcap fund,” explained Pankaj Mathpal, MD and CEO of Optima Money Managers.

On other hand if you want to invest for a horizon of 5 years then the mix should be 50-50 in large and midcap funds only, adds Mathpal. As smallcap funds have a higher risk compared to the other two funds since they invest in smaller companies that have high volatility in share prices.

Returns

Usually, largecap funds are known to offer stable and consistent returns. Since the companies in which these funds invest are generally leaders in their field of business and hence, tend to remain more stable when compared to small or mid-cap companies at times when the markets go volatile.

Midcap funds have the potential to provide higher returns as compared to largecap funds as the growth potential of the underlying companies is on the higher side. Midcap companies have the potential to beat the benchmark and large-cap funds when the markets are bullish. This is possible as the underlying stocks will tap into the growth opportunities.

Smallcap funds can outperform both large and midcap funds since these companies are relatively small, they have a very high potential to grow. But while investing in these funds one must keep in mind the financial thumb rule higher the returns higher is the risk and these funds can at times be volatile.

Top performing funds

To help you better understand the performance of largecap, midcap and smallcap funds in the past here is a list of top-performing funds along with their expense ratio and beta (compared to their benchmark index).

Beta denotes the sensitivity of the mutual fund towards market movements. It is the measure of the volatility of the mutual fund portfolio to the market. The beta of the market or benchmark is always taken as 1. Any beta less than 1 denotes lower volatility and higher than 1 denotes more volatility compared to the benchmark index.

Largecap mutual funds are equity funds that invest primarily in the top 100 companies of India

Midcap mutual funds invest in companies lying between 101-250 by market capitalisation.

Smallcap mutual funds invest in stocks of all companies except the largest 250 stocks

 

“While past performance is just one aspect of analyzing a fund. Investors should closely look at a fund portfolio as a particular sector or a stock that is performing well today may not perform well in the future. Hence, it’s important to look at the sector and stock allocation within each fund and if it coincides with an individual investment profile and philosophy one can go ahead and invest,” advises Mathpal.

(Disclaimer: The above list is for informational purpose only. Before investing, please consult your financial adviser.)

Download Money9 App for the latest updates on Personal Finance.

follow us

  • Facebook
  • Twitter
  • LinkedIn
  • Telegram
  • Youtube
  • Instagram

also read

  • Benefits of rental bonds for tenants

    Benefits of rental bonds for tenants

  • Rental Bonds can be key to knowing your tenant

    Rental Bonds can be key to knowing your tenant

Read more news on

  • financial goals
  • investing
  • Largecap
  • Midcap
  • mutual funds

Latest Video

SEE MORE
TV9 Network and Money9 Presents Financial Freedom Summit

TV9 Network and Money9 Presents Financial Freedom Summit

Updated: March 15, 2023
Is the government asking us to save or not to save, that's the question! | Union Budget 2023 |  Money9 English

Is the government asking us to save or not to save, that’s the question! | Union Budget 2023 | Money9 English

Updated: February 2, 2023
Dear Finance Minister, getting a job or an admission in a good college is difficult, please help

Dear Finance Minister, getting a job or an admission in a good college is difficult, please help

Updated: January 31, 2023
Dear Finance Minister, will savings schemes get a makeover this Budget 2023?

Dear Finance Minister, will savings schemes get a makeover this Budget 2023?

Updated: January 30, 2023
A pensioner airs his grievances in front of Finance Minister ahead of upcoming Union Budget 2023

A pensioner airs his grievances in front of Finance Minister ahead of upcoming Union Budget 2023

Updated: January 27, 2023
A contractual government employee writes open letter to Finance Minister giving suggestions on Budget 2023

A contractual government employee writes open letter to Finance Minister giving suggestions on Budget 2023

Updated: January 25, 2023
A disappointed homebuyer writes open letter to Finance Minister failure giving suggestions for Budget 2023

A disappointed homebuyer writes open letter to Finance Minister failure giving suggestions for Budget 2023

Updated: January 25, 2023
A gig worker writes open letter to Finance Minister ahead of Union Budget 2023

A gig worker writes open letter to Finance Minister ahead of Union Budget 2023

Updated: January 24, 2023
Open in App

Related

  • Invest in mutual funds through this fund called Fund of Funds

    Invest in mutual funds through this fund called Fund of Funds

  • Government chooses mutual funds over job creation

    Government chooses mutual funds over job creation

  • Multi-cap funds: What are they and how do they work

    Multi-cap funds: What are they and how do they work

  • Baroda BNP Paribas Mutual Fund launches Multi Asset Fund NFO

    Baroda BNP Paribas Mutual Fund launches Multi Asset Fund NFO

  • More important to save than to earn, remember these five mantras

    More important to save than to earn, remember these five mantras

  • What financial instruments are traded in stock markets?

    What financial instruments are traded in stock markets?

More

  • How beneficial and economical is purchasing an electric vehicle?
    Tax

    Let Govt Fund Part Of Your Car!

  • Tata ends talks with Bisleri
    Bulletin

    Tata ends talks with Bisleri

  • Know the correct strategy of paying credit card dues!
    Savings

    Know the correct strategy of paying credit card dues!

  • Which is better active or passive fund?
    Mutual Funds

    Which is better active or passive fund?

  • Who should opt for Multi-Year Health Policy?
    Insurance

    Who should opt for Multi-Year Health Policy?

  • TV9 Sites

  • TV9 Hindi
  • TV9Telugu.com
  • TV9 Marathi
  • TV9 Gujarati
  • TV9 Kannada
  • TV9 Bangla
  • News9 Live
  • Know this india
  • Money9 Sites

  • Money9 Hindi
  • Money9 English
  • Money9 Marathi
  • Money9 Telugu
  • Money9 Gujarati
  • Money9 Kannada
  • Money9 Bangla
  • Topics

  • Insurance
  • Savings
  • Loan
  • Stocks
  • Mutual Funds
  • Real Estate
  • Tax
  • Crypto
  • Exclusive
  • Daily Shows

  • 2+2=5
  • Take it Easy
  • Red Alert
  • Formula Guru
  • Money Gyan
  • Money Central
  • Jhatpat
  • Money time
  • Weekly Shows

  • Money Comics
  • Economicom
  • Realty Check
  • Smile and pay
  • Money Tales
  • Companynama
  • Spend Wise
  • Follow us

  • FaceBook
  • Twitter
  • Youtube
  • Instagram
  • Linkedin
  • Download App

  • Andorid
  • ios
  • Contact Us
  • About Us
  • Advertise With Us
  • Privacy & Cookies Notice
  • Complaint Redressal
  • Copyright © 2022 Money9. All rights reserved.