Small Cap & Mid Cap funds

Q & A Forum › Category: Mutual Funds › Small Cap & Mid Cap funds

Deva asked 10 years ago

Hi Sreekanth, First of all I would like to appreciate the efforts that you have put in to built a guide for making investment decisions easier. Also, you have spent a significant amount of time to answer people's queries which brings me to my question. There is an article posted on economic times which was to avoid investment in small & mid cap funds, for which the link is as below: https://goo.gl/wP17aN I was not able to make much sense of the article and wanted your guidance on the same. My age is 30 and I am willing to take high risk by investing in small/mid/multi cap funds, but when i came across the above article I became a bit weary about small & mid cap funds hence wanted your take on the same.

2 Answers

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Sreekanth Staff answered 10 years ago

Hi, Kindly don't take these kind of articles too seriously. The same newspaper might have written or write about 'why small-cap funds SHOULD be part of everyone's portfolio' :) Considering your age and risk appetite, and if you have long-term horizon, kindly go ahead and invest in a Small-cap fun. Also, you may ensure to have Fund from other categories too in your MF portfolio, besides this Small cap fund. Kindly read: http://www.relakhs.com/mutual-fund-categories-market-capitalization-large-cap-vs-mid-cap-vs-small-cap-funds/ http://www.relakhs.com/best-mutual-fund-scheme-risk-ratios/ http://www.relakhs.com/my-mutual-fund-portfolio-mf-picks/

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kaamleshpatel answered 7 years ago

Mutual funds are generally categorized in terms of the stock they invest in, their market capitalisation as well as the size of the company. All equity mutual funds are further categorized into small, mid, large and multi cap funds, depending upon their investment type.
Small-cap funds: Small cap funds are those in which investments are done in small, new and relatively less stable companies as opposed to corporations that are well established. These are usually firms that are developing and have a greater possibility of succeeding. That said, such companies also have a high amount of risk and may go out of business. Small cup funds are ideal for investors with high risk appetites, seeking aggressive growth.
Mid Cap funds: These are stocks that invest in companies that have certain characteristics of small cap funds; however the risk factor is relatively lower. Mid cap funds are lesser prone to market fluctuations and much more stable when compared to small cap funds. These are ideal for investors seeking higher capital appreciation with medium risk appetites.
Regards,
Kamlesh Patel