Mid Cap vs Large Cap Funds: 3 Things You Need to Know

Mutual funds give you a wide range of options to select from, according to your investment goals and risk appetite. Doesn’t matter what your goal is, there will be a fund that is the right fit for you.

A good portion of investors tends to rely on their investments for capital appreciation that beats inflation. While directly investing in stocks could also work here, it involves a lot of work – like finding the list of stocks to buy today to monitoring your portfolio every day. Mutual funds tend to be extremely helpful here and among mutual funds, large cap and mid cap funds tend to be of most help. Let’s understand these funds better.

Large cap funds

Large cap funds invest most of your money in the equities of large cap companies. These are mostly the top 100 performing companies in the stock market today and they tend to be extremely sensitive to market volatility. This enables a great growth opportunity for your money, along with the market growth.

These are ideal for investors who are looking to grow their money, unafraid of the risks associated with it.

Mid cap funds

These are funds that have 65% of their portfolio filled with stocks of mid cap companies. Mid-cap companies are those companies that are potential future leaders, and their growth prospects show exactly that. Much like large cap companies, these companies are sensitive to market volatility and a lot of these companies have unexplored potential that can help you grow your money more than large cap companies can, on occasions.

Mid cap funds present you with an ideal mix of risk and returns. There is lesser risk compared to a large cap fund and with substantial return potential. It is ideal for people who are looking for capital appreciation but are mildly vary of risks.

Large cap and mid cap funds are intriguing for investors who are looking for capital appreciation. If you are interested too, read the below three things you should know before you decide to invest.

  1. They are suited for aggressive investors

As said above, these funds are more in-line with the risk appetite of aggressive investors. They tend to be highly volatile, which means there is a higher potential for growth and an element of risk that is parallel. Large and midcap companies choose stocks to invest in from the top 250 performing companies in India, among more than 5,000 that are publicly listed. Hence, when you invest in them, you are putting your money in the market spotlight.

  1. They are best when kept for a longer time

As said above, they tend to be volatile and this volatility could cause short term ups and downs, which makes them less suitable for investors with shorter term goals. In long term, the smaller losses will be offset by the overall growth of the market and that is why it is ideal for investors who are looking for a longer-term investment.

  1. Financial planning is vital

Randomly investing in these funds may not help you reap all its benefits. Instead having a solid plan and investing accordingly is always ideal.

Large cap and mid cap funds are mutual funds that have arguably the most growth potential. To explore this to the fullest and to avoid any loss, make sure you do your homework and invest according to your investment horizon.

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