Introduction
In the ever-changing world of finance, investing in Mutual Funds is a smart choice. Under its umbrella, Mutual Funds has a special category with the name Large and Mid Cap Funds that stands as a flexible investment option for investors. As investors make their way through an extensive range of options, their attention is increasingly drawn to these funds. It bridges the gap between established market titans and emerging businesses.
As the investment landscape evolves and investors seek diverse portfolios these funds are the perfect fit.
In this article, we will explore the importance of investing in this category. Shedding light on its potential for delivering consistent returns while effectively managing the risks. While understanding their unique features it will serve as a complete guide to everyone reading this piece. Let’s start by understanding this category to see if it’s worth it to invest in it.
What is the Large and Mid Cap Category?
Large and mid-cap Mutual Funds are a hybrid class that includes parts of both large-cap and mid-cap assets. These funds often invest in companies with market capitalizations that fall within a specific range. It includes both large established organizations and smaller companies with fast-emerging businesses. Large-cap companies are established enterprises with large market presence. Wherein, mid-cap companies have more growth potential and are ready for development.
How Large and Mid Cap Funds Work?
Pooling investors’ money involves large and mid-cap funds collecting funds from various investors, rather than each investor purchasing individual stocks, they contribute their money to the fund.
The fund then utilizes the pooled money to purchase a variety of equities, including large-cap (big companies) and mid-cap (medium-sized companies) companies.
Fund managers ensure that the fund’s assets are appropriately dispersed across large-cap and mid-cap firms, avoiding over-concentration in any one type of company. Fund managers undertake research and analysis on the stock market and various firms to seek the greatest investment possibilities. They evaluate aspects such as the company’s financial health, growth prospects, and industry trends.
To reduce risk, Large and Mid Cap Funds spread their assets among numerous firms rather than focusing all capital on a few. This diversification method serves to mitigate the impact of underperformance by a single firm on the whole investment. Large and mid-cap funds seek to combine growth potential with risk management. They invest in mid-cap firms for growth and large-cap companies for stability. In simple terms, large and mid-cap Mutual Funds actively combine client funds and invest in a mix of large and mid-cap firms. They seek to strike a balance between growth and risk through diversification and thorough research by fund managers.
Top 7 Fund Schemes under Large and Mid Cap Funds
Axis Growth Opportunities Fund
Investment objective
This strategy aims to create long-term capital appreciation by investing in a diverse portfolio of equity and equity-related instruments, both in India and abroad.
Fund house name: Axis Mutual Fund
Launch date: 10.10.2018
CAGR: 20.87%
AUM (Asset Under Management): Rs.11310.89 Cr (as of 29.02.24)
HDFC Large and Mid-Cap Fund
Investment objective
This scheme seeks long-term capital appreciation by investing largely in stocks and equity-related instruments of large-cap firms. Companies selected for inclusion in the portfolio will have proven the ability to expand at a respectable rate over the medium to long term.
Fund house name: HDFC Mutual Fund
Launch date: 18.02.1994
CAGR: 11.89%
AUM (Asset Under Management): Rs.17756.88 Cr (as of 29.02.24)
ICICI Prudential Large & Mid-cap Fund
Investment objective
This scheme intends to achieve long-term capital appreciation by investing 95% in shares, with the remainder invested in debt and money market securities.
Fund house name: ICICI Prudential Mutual Fund
Launch date: 09.07.1998
CAGR: 18.8%
AUM (Asset Under Management): Rs.11333.37 Cr (as of 29.02.24)
Kotak Equity Opportunities Fund
Investment objective
This strategy seeks to invest in a mix of large and mid-cap equities across sectors depending on the performance and potential of companies in varied sectors.
Fund house name: Kotak Mutual Fund
Launch date: 05.09.2004
CAGR: 18.86%
AUM (Asset Under Management): Rs.19.092.3 Cr (as of 29.02.24)
Quant Large & Mid-cap Fund
Investment objective
This scheme seeks to provide current income and long-term capital growth through a portfolio primarily comprised of equities and equity-related assets. The principle of value investing will govern the scheme’s investments. The emphasis will be on choosing firms with significant sustainable competitive advantages in solid businesses, sound management, and reliable dividend payments.
Fund house name: Quant Mutual Fund
Launch date: 11.12.2006
CAGR: 15.04%
AUM (Asset Under Management): Rs.1884.01 Cr (as of 29.02.24)
Mahindra Manulife Large & Mid-Cap Fund
Investment objective
This Scheme pursues long-term capital growth by investing in equity and equity-related instruments from both large and mid-cap companies.
Fund house name: Mahindra Manulife Mutual Fund
Launch date: 30.12.2019
CAGR: 24.15%
AUM (Asset Under Management): Rs.1927.6 Cr (as of 29.02.24)
Motilal Oswal Large and Mid-Cap Fund
Investment objective
This Scheme aims to deliver medium to long-term financial appreciation by investing predominantly in large and mid-cap equities.
Fund house name: Motilal Oswal Mutual Fund
Launch date: 05.10.2019
CAGR: 23.59%
AUM (Asset Under Management): Rs.347697 Cr (as of 29.02.24)
Pros and Cons of Investing in Large and Mid-Cap Funds
Learning the benefits is as important as knowing the right medicine to cure one’s health.
The following are the advantages of investing in this category:
Diversification
Large and Mid Cap Funds offer diversification across companies of different sizes and sectors, reducing portfolio risk.
Growth Potential
These funds provide exposure to both established large-cap companies and promising mid-cap firms, offering the potential for capital appreciation.
Active Management
Fund managers actively monitor and adjust the fund’s holdings, aiming to capitalize on market opportunities and optimize returns.
Flexibility
Investors can choose from a range of large and mid-cap fund schemes tailored to their risk tolerance and investment objectives.
Now that we discussed the merits, let’s take a quick peek by understanding the necessary drawbacks as well. Here are the cons of this category:
Volatility
Mid-cap stocks, in particular, can be more volatile than large-cap stocks, leading to fluctuations in fund performance.
Market Risk
Large and mid-cap funds are susceptible to market fluctuations and economic conditions, impacting returns.
Manager Risk
The fund’s performance is influenced by the expertise and decision-making of the fund manager, introducing manager risk.
Expense Ratio
Actively managed large and mid-cap funds often have higher expense ratios compared to passively managed index funds, affecting overall returns.
Conclusion
At last, investing in big and mid-cap mutual funds brings both possibilities and challenges to investors. These funds provide diversity among firms of varying sizes and industries. It allows capital appreciation and active management by fund managers. However, investors should be aware of the volatility of mid-cap equities, market changes, manager risk, and the higher expense ratios associated with actively managed funds. Despite these disadvantages, large and mid-cap funds remain a viable alternative. Investors looking to develop a diversified portfolio with the potential for long-term growth. Particularly when considering the benefits of a Systematic Investment Plan (SIP). Investors must consider their risk tolerance and investment objectives before investing in this category. Through these customers can benefit from the advantages while reducing the risks associated with this category.
