Difference Between Large cap and Mid cap Funds: It is important to have some understanding before investing in the market. Two such terms are mid cap and large cap, know what their meaning is.
Understanding how mutual funds work can be a bit difficult for a new investor. As an investor, you will not want to invest in an investment product that you do not understand. Similarly, you will also try to find some opportunities that can promise to help your money grow in a steady way. You will be able to ensure this only after thoroughly understanding all types of investment options present in the market.
You can take help of a financial advisor for guidance in this matter, but it is never bad to keep a little information about your financial health. When investing in mutual funds, it is important to understand all aspects of this. In this article, we have compared large cap and mid cap funds.
The move by the Securities and Exchange Board of India (SEBI) to reclassify mutual funds in India has made it easier for investors to identify and compare different types of mutual fund schemes. As a result of this SEBI order, all mutual funds are broadly classified into five scheme categories: equity, debt, hybrid, solution-oriented and others.
Of these, equity schemes are divided into 10 sections such as large cap funds, mid cap funds, small cap funds, multicap funds, etc. On the other hand, debt schemes are divided into 16 parts and hybrid schemes into 6 parts. Equity mutual fund schemes are meant for investors who want to take a higher risk than conservative investors and are looking for a long-term investment with good returns.
Equity schemes have different types of risk because the investments made in it are linked to the stock market. Of these, the money invested in large cap funds is invested in most companies in India in terms of market capitalization, hence they are considered more stable or stable and less risky while the money invested in mid cap funds Are invested in companies that may later become large-cap companies but which are currently more risky.
What are large cap funds?
As its name suggests, money invested in large cap funds is invested in India’s largest companies in terms of market capitalization. As per SEBI norms, large cap companies are defined as top 100 companies in terms of market capitalization.
These are reputed companies with long standing best records in different fields. As a result, these companies are stable or stable and grow at a moderate pace making them less volatile or volatile than mid-cap and small-cap funds. Large companies have the highest revenue, profit, and market share. Their corporate governance and legal compliance are also of a high standard.
Since such companies are owned by a number of countless shareholders, the possibility of manipulating their share price is also less. When the market passes through volatility, large cap funds are not volatile in the sense that there are mid cap and small cap funds.
Hence, large cap investors remain largely relaxed and get good value for their money in the long run. The other aspect is that large-cap funds may not see as much explosive growth as can be found in mid-cap and small-cap.
What are mid cap funds?
The money to be invested in mid cap funds is mainly invested in companies that are medium sized. According to the definition of SEBI, in terms of market capitalization, they are ranked between 101 and 250. If an investor invests in mid-cap mutual funds, their money is invested in stocks of mid-sized companies that have the potential or potential to become large-cap companies in the future.
These are suitable for investors who want to take a higher risk as mid-cap funds are more volatile or volatile than large-cap funds. Since there is also a possibility of getting terrible returns, these types of funds are best for investors who want to invest for a long time and raise more risk.
In the end
For an early investor, it may not be easy to decide which one to invest in large cap and mid cap funds. But, while making any decision, your financial goals, investment period, and risk appetite should be kept in mind.
If your risk appetite is low, then you can think about investing in large cap funds. If your desire or ability to take the risk is high, then you can place bets on small companies which are likely to grow. If there is any doubt, please consult the investment adviser.
(The author of this article is Adil Shetty, CEO of BankBazaar.com)
(Disclaimer: This information is based on expert reports. Markets are subject to risks, so get advice at your level before investing.)