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Wednesday, April 18, 2018

Should you Invest in Large cap or Mid-cap Funds?

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SIPs allow an investor to deploy the principle of rupee cost averaging to take advantage of market volatility. When the NAV of a fund is high (typically when markets have risen) fewer units of a fund would be purchased from the investment amount and when the NAV is lower more units of a fund would be purchased with the same investment amount, thereby reducing the average cost of units purchased over a period of time.

Hence, if you intend to invest through SIPs over a long tenure (5-10 years), then you could divide the allocation between a large cap and mid-cap fund, perhaps in equal proportion or 60:40 in favour of large caps based on your risk appetite.

Alternatively, you could invest in an equity diversified fund that invests in a mix of large, mid and small caps in a proportion based on the fund manager's views.


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