Large & Mid Cap Mutual Funds

Large and Mid Cap Mutual Funds are equity mutual funds and invest primarily in a mix of large and mid-sized companies. As opposed to a large cap fund or mid cap fund, these funds have the leeway to diversify their investments across a single fund.

As per regulation, a fund in the large and mid cap category has to invest at least 35% in large caps and at least another 35% in mid caps. This means that at least 70% of your money is invested in the top 250 companies of India.

Once this basic requirement is met, the fund manager can decide where the remaining funds need to be allocated. Some funds who chase higher returns will have more mid cap exposure and might even add small caps to their portfolio. While funds who want to keep volatile in control might allocate more to large caps. Although they can keep changing this mix based on how the market is performing or expected to perform

• Diversification:

  Since multi cap funds invest across companies of various sizes and sectors, they offer a diversified portfolio. This diversified approach lowers down the risk for you. That's because different sectors or parts of the market can perform differently at any given time, and this spreading out of investments across keeps the risk in control.

• Stability of large caps and growth of mid caps, together:

  Large caps are the big companies, are market leaders, and are financially strong. On the other hand, mid caps are where these large companies were a few years back and are challengers. With large and mid cap funds, you get the mix of both in a single fund.

• Exposure in Mid Caps with Lesser Risk than Pure Mid Cap Funds:

  Mid caps can be volatile in the short to medium term. Many people stay away from them as they are not comfortable with that volatility and miss out on the potential these companies have. Large and mid cap funds allow you to take advantage of growth mid caps come with but without taking the risk of pure mid cap funds. The large cap component the portfolio brings stability to returns and so at an aggregate level, the risk is kept under control.

• Investors seeking Long Term Capital Growth:

  These are ideal for investors looking to generate wealth in the long haul. If you are an investor who has a long term investment horizon, then large and mid cap funds are meant for you. Long term goals like buying a house, child's education, early retirement can be met by investing in large and mid cap mutual funds. It is advisable for long term capital growth because the mid cap investments show exponential growth only in the long run.

• Investors Looking to Invest in Mid Cap but don't want to take a lot of risk :

  Pure mid cap funds are slightly more volatile than large and mid cap funds. That's because, in a large and mid cap fund, a part of your money is also invested in large cap stocks. These companies tend to deliver consistent returns even in tough market conditions, and therefore you get more stable returns overall.

• Investment Goal:

  As this is an equity mutual fund, it generally has a long term investment horizon. It helps in fulfilling long term financial goals. So this fund is best suited for investors who are ready to invest for at least 5 years.

• Risk:

  As we said, these are equity mutual funds. They invest in stock markets. And stock markets can be volatile in the short term. Although these funds are diversified and invest in India's top 250 companies, they are not immune to stock market fluctuations.

• Expense Ratio:

  While managing a large & mid cap mutual fund, the Asset Management Companies incur some operating and administrative costs. The fund manager's salary is one of them. These costs are passed on to the investor in the form of an annual fee known as the expense ratio. So look at the expense ratio of the fund while picking a fund.

• Short Term Capital Gain Tax (STCG):

  If you sell your investments within 1 year, the gains are classified as Short Term Capital Gain (STCG) and you need to pay 15% tax on them.

• Long Term Capital Gain Tax (LTCG):

  Whereas any multi cap investment held for more than one year, the gains are classified as taxed Term Capital Gain (LTCG). Gains of up to 1 lakh in a financial year are tax-free. Beyond 1 lakh, the gains are taxed at a rate of 10%.

Let's look at some of the top-performing mutual funds helming the multi cap category. The performance is based on the basis of returns provided by the fund in the last 3 and 5 years.

*It must be noted that these are not fund recommendations. Besides, they are also not the only way through which you can rank funds.

It is quite easy to invest in Large & Mid Cap Funds on ET Money. All you need to do is just follow these below-mentioned steps: