Two of the most popular categories of Mutual Funds are Large Cap Funds and Mid Cap Funds. These funds are classified according to the market capitalisation of listed companies. At the end of this article, you will be able to compare and differentiate between Large Cap Funds and Mid Cap Funds.

Mid cap v/s Large Cap Funds

The Mutual Fund schemes formulated by different Asset Management Companies (AMCs) are distinct in terms of asset allocation, investment strategy etc. Moreover, the categorisation and Rationalisation of Mutual Fund schemes by the Securities and Exchange Board of India (SEBI) has curbed the ‘need of uniformity in the characteristics of similar type of schemes launched by different Mutual Funds’.

Large Cap Funds and Mid Cap Funds are two of the broad categories which are rationalised by SEBI. Large Cap Funds are the open-ended equity schemes which predominantly invest in large cap stocks. On the other hand, mid cap funds are schemes which invest majorly in stocks of mid cap companies.

Difference between Large Cap Funds and Mid Cap Funds

Check out this comparison table to further understand how large cap funds are different from mid cap funds-

ParametersLarge Cap FundsMid Cap Funds
Market CapitalisationTop 100 companiesCompanies falling between 101th to 250th
Portfolio ConstitutionMinimum 80% of total assets invested in equity & equity related securities of large cap companiesMinimum 65% of total assets invested in equity & equity related securities of mid cap companies
ReturnsSteady Returns. May underperform the small & mid cap funds during bullish marketHigher returns than large cap funds but may underperform the small cap funds during bullish market
Risk InvolvedModerately RiskyHigh Risk
Suggested Investment HorizonAt least 3 to 5 yearsAt least 5 to 7 years
SuitabilityInvestors with low risk appetite and long term investment perspectiveInvestors with high risk appetite and expectations of higher returns
VolatilityLess VolatileHigh Volatility

What is a Large Cap Fund?

Large Cap Mutual Fund is a scheme which primarily invests a minimum 80% of the total assets in the stocks of large cap companies. In terms of market capitalisation, large cap companies are the top 100 rankers.

Large cap funds are also known as ‘Bluechip Funds’. The name Bluechip is taken from the game of poker in which blue chips hold the highest value on the table. Similarly, Bluechip companies/stocks have the highest market value.

Investments in such funds not just bring sanity & stability to the portfolio but also minimise the degree of risk involved. But, the returns from large cap funds are lesser than other fund types such as mid cap or small cap funds.

Also Read: Best Large Cap Funds for 2020

What is a Mid Cap Fund?

Mid Cap Mutual Fund scheme is a fund which predominantly invests a minimum 65% of the total assets in the stocks of mid cap companies. In terms of market capitalisation, mid cap companies fall between the 101th and 250th largest companies.

Investments in Mid Cap mutual funds initiate a perfect blend of risk and returns by investing in the companies having considerable amount of stability, along with their responsiveness to market fluctuations.

Mid cap funds can easily outperform large cap funds during bullish market conditions because of the concentration of investments in stable companies with potentially strong business plans.

To know more about What are the Best Mid Cap mutual funds 2020, Click Here

Which is better for investment Large Cap Funds or Mid Cap Funds?

Whether it is a short term financial goal or a long term goal, assessing and analysing the investment options is very important. Both large cap funds and mid cap funds have their own set of advantages and disadvantages in terms of market performance. Here are some of the factors which will further help you choose a suitable option-

  • Returns

What is the first thing in an investor’s checklist of choosing an ideal investment scheme? Returns! Investments in large cap funds are definitely less volatile but at the same time, you cannot expect peculiar returns. However, such funds can give you long term capital appreciation as well as steady income.

On the other hand, if you are more inclined towards accruing high returns than market risk, you can invest in a good mid cap fund. The returns from such funds are not just stable but are considerably higher than large cap funds.

  • Risks 

All Mutual Funds are subject to market risks. However, the degree of risk and their respective tendencies to sail through market fluctuations differ significantly. Large cap mutual funds invest in the companies which are actively performing in the market and have a large market capitalisation. Because they have a strong market presence for several years, the funds investing in such companies turn out to be less risky.

In the case of Mid Cap Funds, the risk profile is relatively high because of asset allocation in emerging businesses which are not yet established. However, if you keep your funds invested for more than 5 years, you will earn higher returns.

  • Investment Horizon

Large cap mutual funds often underperform during market downturns which makes such funds suitable for the investors with a long-term investment horizon. This implies that the returns will be averaged out over a longer duration of time. To get sufficient returns from large cap funds, individuals are suggested to keep invested for at least 5 to 7 years.

Similarly, if you are willing to invest in mid cap mutual funds, you must be patient enough to stay invested for a long duration (at least 7 to 8 years). The reason behind this is that the portfolio of such funds have a combination of stocks of companies which are stable but not properly established.

  • Suitability

Individuals with a low risk appetite and long term investment goal can opt to invest in large cap mutual funds. These funds can be considered by new investors who are not exactly familiar with the functioning of the market.

However, investors with enough knowledge and experience of market projections can invest in Mid cap Mutual funds. These funds are suitable for investors with long term financial goals and high risk tolerance.

In a nutshell,

There are several parameters on which one category is differentiated from the other. Every investor, irrespective of his experience in the market, must consider and analyse all the factors to invest in conjunction to his/her financial goals.

Top 5 Large Cap Mutual Funds for 2020

Fund NameAUM (Cr.)1-Year Return (%)3-Year Returns (%)5-Year Returns (%)
Mirae Asset Large Cap Fund16,87315.9816.0912.50
Axis Bluechip Fund10,21223.3421.5011.93
ICICI Prudential Bluechip Fund25,02512.0213.399.42
SBI Bluechip Fund23,64114.5512.2110.48
Nippon India Large Cap Fund12,9559.5514.399.17

(Data as on 20th January 2020; Source- Value Research)

Best 5 Mid cap Funds to Invest in 2020

Fund NameAUM (Cr)1-year Returns (%)3-year Returns (%)5-year Returns(%)
Kotak Emerging Equity Fund5,88818.7012.7612.10
DSP Mid Cap Fund6,95717.9911.9511.45
L&T Midcap Fund5,9928.3311.0711.08
Invesco India Mid Cap Fund67413.2814.2511.00
Axis Midcap Fund4,14119.4618.7511.00

Data as on 23 January 2020; Source: Value Research

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