The Top 10 Large and Mid Cap Funds You Need to Know About
Introduction
In the modern era, investing is made simple with varied fund schemes available for investors. Amongst these investments, Large and Mid Cap Funds have created a buzz in the finance industry. These funds, as its name implies, contain a blend of big and mid-cap equities. This category provides the benefits of both large and mid-sized companies. This fund comes under the Equity Funds. Unlike large or mid-cap funds, these funds diversify their investments within a single fund.
In this article, we will study this category very closely. We are focusing on the fundamentals and highlighting the main features of investments made into this fund. Let’s start by understanding this category more closely.
Large and Mid Cap Funds: Overview
The meaning of “large and mid-cap” refers to the size of the firms in which the mutual fund invests.
“Large Cap” refers to businesses with a high market capitalization, which often varies between several billion to hundreds of billions of dollars. These companies are well-established, with stable profitability and a sizable market share.
“Mid Cap” refers to corporations with market capitalizations that fall midway between small and large. These companies often have greater growth potential than large caps, but they may entail a higher risk.
So, when a mutual fund is labelled “Large and Mid-Cap,” it signifies it invests in both large and mid-cap companies. This allows the fund to get exposure to a broader range of companies, combining the stability of large caps with the growth potential of mid-caps. The phrase “large and mid-cap” refers to the size of the firms in which the mutual fund invests.
Why Invest in Large and Mid Cap Funds?
Spreading money around is the primary investment guideline. The advantages of investing in combined Large and Mid Cap Funds come from the inclusion of both company types. “Why not just invest in large companies and mid-sized ones separately?” can be a question that comes to mind.
Yes, one could, but investing in a single fund that possesses both may provide you with more benefits. See, if we invest in a fund that is only focused on huge corporations, the management is required to allocate over 80% of the funds to those major companies. The remaining 20% can then be used as they see fit, with investments made in smaller businesses. Additionally, they must invest around 65% of a mid-cap fund in mid-sized businesses.
However, the management has greater freedom to redistribute capital in a large and mid-cap fund. To hedge against losses during a market downturn, they might allocate a larger portion of their funds to larger firms while holding onto a smaller portion in mid-sized ones. Additionally, they might invest more in mid-sized and smaller businesses in an attempt to increase profits while the market is rising.
Identifying the Key Features of Large and Mid Cap Funds
The main features of this category of funds are as follows:
Market Capitalization
Large-cap funds mainly invest in large, well-known companies with big market values. While on the other hand, mid-cap funds target companies with medium-sized market values.
Investment Horizon
Both large and mid-cap funds usually aim for long-term investments. It means they are best for investors willing to hold onto their investments for many years.
Growth Potential
Large-cap funds offer stability and steady growth potential, while mid-cap tend to give higher growth as they invest in small companies. These funds combine both these qualities and provide them in one fund scheme.
Flexibility
These funds offer fund managers an easy way to adjust the portfolio allocation between large and mid-sized companies.
Top 10 Large and Mid Cap Funds
The following is a list of the top 10 Best Performing fund schemes to invest in 2024:
- Axis Growth Opportunities Fund
- HDFC Large and Mid-Cap Fund
- ICICI Prudential Large & Midcap Fund
- Kotak Equity Opportunities Fund
- Quant Large & Midcap Fund
- Mahindra Manulife Large & Mid Cap Fund
- Motilal Oswal Large and Midcap Fund
- Edelweiss Large & Mid Cap Fund
- SBI Large & Mid Cap Fund
Things to Consider Before Investing in Large and Mid Cap Funds
There are many things to keep in mind so it is easy to forget a few necessary precautions. To help remember them here is a list to consider:
Investment Goals
This equity mutual fund typically has a long-term investment horizon. It helps in achieving long-term financial objectives. As a result, this fund is best suited for investors willing to commit to a minimum of 5 years.
Risk Tolerance
As said, these are equities mutual funds. They invest in the stock market. Additionally, stock markets can be volatile in the near term. Although these funds are diverse and invest in India’s top 250 companies, they are not left out of the market fluctuations and changing trends.
Expense Ratio
Asset management companies suffer operational and administrative charges while managing Large and Mid Cap Funds. The fund manager’s retirement or leaving is one of them. These costs are passed on to investors through an annual fee known as the expense ratio. So, look at the expense ratio of the fund while picking a fund for investments.
Fund’s Performance
Evaluate the past performance of large and mid-cap funds. Look for variables like annual returns, volatility and benchmark comparisons. However, past performance does not promise future performance, so consider other factors first.
Management of Fund
Research the fund manager’s experience, expertise and investment philosophy. A skilled and experienced team can significantly impact the fund’s performance and ability to navigate market shifts effectively.
Diversification
Consider how these funds fit into an individual’s overall portfolio diversification strategy. Diversifying across asset classes, sectors and market capitalization can help spread risk and enhance long-term returns.
Economic and Market Conditions
Before investing, assess the current economic and market conditions. Factors such as interest rates, inflation, geopolitical events and market sentiments impact the performance of these funds differently.
Conclusion
In conclusion, investing in large and mid-cap funds through SIP offers a balanced approach to growing money steadily over time. These funds combine the stability of large companies with the growth potential of mid-sized ones, making them a popular choice for investors seeking long-term wealth accumulation. Before starting your systematic investment plan, it’s essential to consider investment goals, risk tolerance, and the fund’s performance. Keep an eye on factors like expenses, fund management, and how the fund fits into the overall investment strategy. By staying informed and considering these factors carefully, make smart decisions to help achieve long-term financial goals through systematic investment plans.
