Mutual Funds: A reputable wealth manager would inform you that small-cap funds are among the most volatile and offer unpredictable returns, while large-cap funds are the safest option. However, the average annual return from large cap funds was 16.15%. Small caps provided the highest average return of 34.29 percent, while mid cap funds yielded a return of 30.77 percent.
Large Cap Mutual Funds Dominance
It is important to remember that large cap funds have attracted the largest investment with total assets under management (AUMs) of ₹2,76,639 crore, even though they have modest returns. And small cap mutual funds have the smallest asset size, totaling ₹2,20,176 crore (see the table below). In order to identify the top five mutual funds in each of the three market capitalization categories—large cap, mid cap, and small caps—we further analyse the data.
Large cap mutual funds
Mutual fund schemes that allocate at least 80% of their assets under management (AUM) to large-cap stocks are referred to as large-cap mutual funds. The top 100 companies’ stocks, arranged by market capitalization, comprise the large cap stocks. As of December 21, 2023, the average one-year return provided by large cap mutual funds was 16.15%, according to data from MorningStar.
Mid Cap mutual funds
Mutual funds categorised as “mid cap” invest at least 65 percent of their assets under management (AUM) in large-cap stocks. The stocks of businesses that are ranked between 101 and 250 according to market capitalization are known as mid cap stocks. According to MorningStar data, mid cap mutual funds had an average one-year return of 30.77 percent.
Small Cap mutual funds
The schemes that allocate at least 65 percent of their assets under management (AUM) to small cap stocks are known as small cap mutual funds. Furthermore, the term “small cap stocks” describes the shares of businesses that, based on their market capitalization, are ranked lower than the top 250. According to MorningStar data, small cap mutual funds had an average one-year return of 34.29 percent.
Investment Decision Framework
Essentially, an investor’s long-term financial objectives determine whether or not they invest in a fund. Only when an investment fits within the larger parameters of asset allocation and is in line with those objectives should an investor choose to make it.
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