Horoscope of Small Cap, Mid Cap, Large Cap, and Multicap Funds

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Equity mutual funds are basically those that invest in the equity and equity related instruments of companies. They are highly risky but at the same time are an aggressive investors’ delight. Investors who seek long-term investment to fulfill their long-term goal, usually invest in such schemes. Today, there are a number of fund houses which have launched different schemes to help investors select the most appropriate one for their investment portfolio. The different subcategories of equity fund have further increase investment opportunities for the investors. In the following points, you will be reading about the features of its subcategories and what they actually are.

Features of Subcategories of Equity Funds

Although there are a number of divisions, here we’re going to share only four sub-categories which are as follows:

1. Small Cap Fund - Small cap funds are the open-ended schemes that mainly invest a minimum of 65% of the total assets in the equity and equity related instruments of small-cap companies. Small Cap companies are the top 251 and more companies in terms of the full market capitalization. These funds provide a chance of high growth to the investors but the risk involved is also very high. Considering that India is a developing country, there is a huge scope of small cap companies doing well.
2. Mid Cap Fund - Mid cap funds are the open-ended schemes that invest a minimum of 65% of the total assets in the equity and equity-related instruments of mid-cap companies. Mid-cap companies are the top 101 to 250 companies in terms of the full market capitalization. These funds too provide an opportunity to earn high returns but less than the small cap funds. The risk involved is less than that in small cap fund but still high.
3. Large Cap Fund - Large cap funds are the open-ended schemes that invest a minimum of 80% of the total assets in the equity and equity related instruments of large cap companies. Large cap companies are the top 100 companies in terms of the full market capitalization. These companies are the established ones which have a stable source of income.
   Talking of these funds, they are said to be for the conservative equity investors as the risk involved in these funds is comparatively lower than both the large cap and small cap funds, and therefore are the returns. These funds are best to invest in the current market situation as the correction phase is going on in the small cap and mid cap space.
4. Multicap Fund - Multi cap funds are the ones that invest a minimum of 65% of the total assets in the equity and equity related instruments spread across large cap, mid cap, small cap stocks of companies. These funds provide a good opportunity to the fund managers for active management and if done properly it can help investors earn good returns with the moderate risk involvement. Since it invests across the different caps, therefore investors get a benefit of balanced risk with an opportunity to earn attractive returns.
   
   

Past Instances of Small, Mid, Large and Multicap Funds

To know the past of a scheme, there are a number of things which should be analysed to get the correct picture. So, the list of returns over different periods of time and the risk measures of the top five schemes for each category have been shared below.

1.Small Cap Funds

In the below table, it can be seen that in all the schemes, the returns have consistently improved from negative figures in one year till five years; four of the top five small cap funds have even provided five year returns double than their three year returns or even more. It is in the seven years’ time that the rate of returns became lower than the five year returns generated by them.

2.Mid Cap Funds

The mid cap funds given in the below table have shown continuous rise in the return rate from one year to five year. In seven years’ time although the rates have gone down, it still seems to be good.

3.Large Cap Funds

In comparison to the small and mid cap fund, it can be seen that the one year returns of the large cap funds are better. But apart from that, these funds too show the same trend as small and mid cap funds, i.e., after the continuous rise till five years, the returns have fallen little in the seven years’ time.

4.Multicap Funds

Since multi cap fund is a mixture of all these funds, therefore it can be seen that here too the returns of all the schemes by different fund houses have continuously increased till five years after which they have started decreasing in the seven years’ time period.

Present Conditions

Mutual fund investment market has gone through a number of changes recently as a result of global as well as local reasons. Equity market has been making rounds in the news because of the correction phase going on in the small cap and mid cap space. This is the reason that large cap funds turned out to be the investors’ favorite as they are yielding better returns comparatively.

The experienced mutual fund investors must be aware of the fact that there is absolutely no need to time the market if you are investing for a long-term as in such cases the investment gets shielded from the short-term fluctuations. With the increase of knowledge and the launch of “Mutual Fund Sahi Hai” campaign, investors have become more aware regarding the right way of investing. This is the reason that the SIP investments in mutual funds have increased recently.

Future Forecast

The experts at MySIPonline believe that the NAV of the mid cap funds and small cap funds may still go lower. In addition to this, the nearing elections 2019 have already sowed a seed of confusion in the minds of investors regarding the right way to invest in mutual funds and how to choose the correct scheme. What investors can do in such situation is that they may invest in a liquid fund and slowly start moving the amount in a small portion in equity funds when they are hopeful that the correction phase is about to end.

The Final Note

You may choose the right scheme for investment according to your risk profile, for example if the you wish to invest in equity scheme with low risk, then you may go in for a large cap fund while if you are aggressive investor, then you may opt for a small cap fund and so on. No matter which equity scheme you choose to invest in, if you are investing in it for a long-term, then there is no doubt that you are opening the doors for the entry of high returns. So, what are you waiting for? Start investing via our platform MySIPonline, and if you wish to get any regular fund related query answered, then you may post the same here.

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