Which is Your Cap : Large, Mid or Small?

One of the question which is always in investors head 'whether to add large cap, mid cap or small cap Funds? Among all three where should one invest, or allocate higher amounts'.

Ideally, you want your equity portfolio to deliver returns over longer periods of 7-10 years. This is where equity mutual funds fits in and the right selection can help you achieve this objective simply by buying and holding the fund for the long-term period you have identified. 

While you may think that the return potential from mid & small cap funds is substantially more than large cap funds, you must consider that the risk is higher too. The higher risk translates into much sharper reduction during market corrections. 

You may get lucky in shorter periods where you are able to capture the high return and exit; if not then in longer periods, returns across the three categories are highly comparable. 

While returns from some schemes in the mid & small cap category have shown sharp rise too when the markets were rallying.The higher risk in small caps is also reflected in the volatility in returns seen across periods and across schemes.

So one should focus on combination of large, mid&small cap which have adequate diversification and a track record of consistent performance across market highs and lows.

Here we have few Schemes with such records.

These funds might have a higher probability of delivering Inflation adjusted returns in any long-term period. 

Hence, consistency of performance and quality of the portfolio is more accurate measure to look out for fund selection rather than the market capitalisation segment. Focus on more accurate metrics when you are making fund choices. 

To know more 

You can also use GIIS Financial tools or Our Android App  for Investment, tracking and Asset allocation planning. 

*Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.

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