What are Large-cap, Mid-cap, and Low-cap Mutual Funds?

While each company is unique, it is possible to use a company's total market value to establish a context for evaluating financial performance and business outlook.

Different Types of Market Cap in Mutual Funds

The total value of all a company's shares of stock is market cap. It enables investors to understand the size of one company compared to another. Market capitalization measures a company's open market value and the market's perception of its prospects, reflecting what investors are willing to pay for its stock.

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What is a Large Cap Fund?

Large-cap Mutual funds are a type of equity in which you can invest funds in a large portion of large market capitalization companies. These are primarily large corporations with large businesses and teams—for instance - Blue chip stocks. These funds have a Market capitalization of Rs. 20,000 crores or more.

According to data released today by the Association of Mutual Funds in India (AMFI), large-cap mutual funds had the highest average net asset under management (AUM) in July.

What are the benefits of investing in large-cap mutual funds?

The following are some advantages of investing in Large Cap Mutual Funds:

Large-cap mutual funds have provided better short-term returns to investors.
They contribute to consistent wealth creation and pay out dividends regularly.
Large-cap fund investments provide consistent and low-risk returns. During a market/business downturn, investors flock to large-cap firms as safer investments.
Large-cap funds can benefit investors who have a low-risk tolerance.
They can withstand a bear market and provide stability.
As large-cap companies have a long history, data/details about them are readily available, making it simple to provide to shareholders and investors.

What are the Factors to Consider when selecting Large-cap mutual funds?

Essential factors to consider when selecting the best large-cap mutual funds:

Large-cap funds' risk/return ratio.
The average rolling returns over the last three years.
The scheme's consistency over the last three years.
The large-cap scheme's asset size.
Long-term investment objectives and the amount to be invested.
Dividend Distribution Tax and Capital Gains Tax.
Understand the meaning of large-cap funds in investment risk, including downside risk.

Large-cap mutual fund examples

1. Nippon India Large Cap Fund: The Nippon India Large Cap Fund is an equity mutual fund that primarily invests in large-cap companies with strong growth potential. It aims to provide long-term capital appreciation by focusing on well-established and financially stable companies.

2. ICICI Prudential Blue-Chip Fund: This fund invests in large-cap, high-quality companies with a strong market position and provides long-term capital appreciation through a diversified portfolio of blue-chip stocks.

3. HDFC Top 100 Fund: This fund focuses on investing in the top 100 large-cap companies in India. It aims to deliver long-term growth by targeting well-established, financially robust companies.

4. JM Large Cap Fund: This fund invests in a diversified portfolio of large-cap stocks with strong growth potential.

5. Edelweiss Large Cap Fund: This fund invests in a range of large-cap stocks to capture the growth potential of established companies and aims to achieve long-term capital appreciation by selecting high-performing, blue-chip stocks.

What is a Mid Cap Fund?

Mid-cap funds make investments in mid-sized businesses. Mid-cap funds invest in stocks of companies that are still in development. These are mid-cap corporations that fall somewhere between large and small-cap stocks. They fall between the two extremes in every important metric, such as company size, client base, revenue, team size, etc. These funds have a market capitalization of Rs. 5,000 crores – Rs. 20,000 crores.

What are the Benefits of Mid Cap Mutual Funds?

The following are some advantages of investing in mid-cap funds:

Mid-cap funds have more significant growth potential than large-cap funds.
They respond faster to market changes and innovations because they are more focused and specialized in their niche.
They frequently outperform large and small-cap funds.

What are the Factors to consider when selecting Mid-cap mutual funds?

Essential factors to consider when selecting the best Mid-cap mutual funds:

Mid-cap mutual fund investors must have higher risk tolerance. Mid-cap mutual funds are volatile and volatile in response to market conditions.
The past performance of any investment is an important consideration when making an investment decision.
When investing in mid-cap mutual funds, it is best to have long-term investment goals, such as child education or early retirement.
Investors should choose a fund with a lower expense ratio because a lower expense ratio mutual fund scheme will provide better returns to investors.

Mid-cap mutual funds examples

1. Quant Mid Cap Fund: This fund invests in mid-cap stocks with strong growth potential, aiming to achieve long-term capital appreciation. It focuses on companies that are poised for substantial growth and have promising market prospects.

2. Motilal Oswal Mid Cap Fund: This fund targets mid-cap companies with high growth potential and delivering long-term capital gains. It invests in a diversified portfolio of emerging businesses that are expected to grow significantly.

3. Mahindra Manulife Mid Cap Fund: This fund focuses on investing in mid-cap stocks with substantial growth prospects. It aims to provide long-term capital appreciation by selecting companies with strong growth trajectories and market potential.

4. HDFC Mid-Cap Opportunities Fund: This fund invests in mid-cap stocks and delivers long-term capital appreciation by focusing on companies with potential for significant growth.

5. Nippon India Growth Fund: This fund aims to achieve long-term capital appreciation by investing in a diversified portfolio of growth-oriented stocks. It focuses on companies with strong growth potential and favorable market conditions.

What is a Low Cap Fund?

The capitalization of the company you invest in is an essential factor to consider when deciding what goes into your equity portfolio. Though these funds are riskier and more volatile in the short to medium term than other equity-oriented funds, they offer a higher upside in the long term. These funds have a Market capitalization below Rs. 5,000 crores.

What are the Benefits of Low Cap Mutual Funds?

The following are some advantages of investing in Low Cap Mutual Funds:

Profit from early investments in companies that have the potential to become market leaders.
Ideal for highly aggressive investors with a 7-year or longer investment horizon or plan.
A lack of financial stamina leads to high-risk exposure to withstand challenging market conditions.

What are the Factors to consider when selecting Mid-cap mutual funds?

Essential factors to consider when selecting the best Mid-cap mutual funds:

Investors should scrutinize small-cap funds' performance.
Without the proper knowledge, one can lose all of one's money while speculating and timing the market.

Low-cap mutual funds examples

1. Nippon India Small Cap Fund: This fund focuses on investing in small-cap companies with significant growth potential. It aims to offer long-term capital appreciation by targeting emerging and high-growth small businesses.

2. Bank of India Small Cap Fund: This fund seeks to provide long-term capital gains by focusing on dynamic and rapidly growing companies.

3. Franklin India Smaller Companies Fund: The fund targets small-cap stocks with high growth potential and aims to generate long-term capital appreciation. It focuses on investing in emerging companies that have the potential for substantial growth.

4. HSBC Small Cap Fund: This fund invests in a diversified range of small-cap stocks with strong growth potential. It aims to achieve long-term capital appreciation by selecting emerging companies with promising future prospects.

5. Tata Small Cap Fund: This fund invests in a variety of small-cap stocks to capitalize on growth opportunities in emerging companies. It aims to provide long-term capital gains by focusing on high-potential small businesses.

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Final Thoughts

A portfolio composed solely of stocks in a single market-cap category may exhibit different reward and risk patterns than a more broadly diversified portfolio. While diversification does not guarantee a profit or eliminate risk on its own, a well-diversified portfolio will have profits in one area that can help compensate for losses in another.