Large, Mid or Small Cap Fund: How Do You Position Your Portfolio to Ride Out The Market Uncertainty

We have all gone through much this second wave!

Now the market is throwing mixed signals.

On one hand it indicates positive recovery triggers such as momentum in vaccination, reducing Covid-19 cases & falling unemployment levels as per CMIE estimates.

However, there is a looming probability of a third wave and downside risks such as rising inflation. Where do you invest during this time - large caps, mid-caps, or small caps.

Smaller companies were impacted most during the Covid-induced macro shocks.

In contrast, large listed companies survived better in FY 2021.

What worked in favour for them? A stronger balance sheet, better cost controls, and business continuity measures.

Market Performance of Large caps vs Mid-caps & Small caps

Now, if you look at the performance of all the indices (Mid Cap, Small Cap & Large Cap), you might see better numbers in the 1-year performance of small caps or midcaps.

But in the long haul, say 10 years, the large cap performance is similar to the other two indices and is more stable which means lower volatility.

Large caps generally are better posed for upward growth over the long term, along with protection from downside, because of their strong fundamentals.

Here are 4 reasons investors generally prefer large cap companies:

On the other hand, if you are looking at a balance of risk with reward, you can look at building a diversified mutual fund portfolio which is market-cap agnostic and varying across styles.

Watch our recent webinar video on Pandemic Impact, Economic Recovery. Investment Strategy - Insights Revealed! where Sorbh Gupta, Fund Manager, Equity & Chirag Mehta, Sr. Manager, Alternative Investments share further insights into the discussion.

Disclaimer, Statutory Details & Risk Factors:

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Above article is authored by Quantum.

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