If you are planning to invest in mutual funds on the special occasion of Diwali, large and mid caps can be a good option. According to the official website of the Association of Mutual Funds of India (AMFI), large and mid-caps have generated returns of up to 29.22% in the last one year.
This return is till October 18, 2024. You can get good returns in this fund by investing through a Systematic Investment Plan (SIP) for a long period. Now let’s talk about large and mid cap mutual funds first.
What are large and mid cap mutual funds?
Large- and mid-cap mutual funds are stock funds that invest in the 200 largest companies in the country. This includes large and mid-cap companies. Investing in this category of funds gives higher returns than pure large-cap funds.
More benefits by investing via SIP for long term
We often find that investing in equity funds turns out to be more beneficial in the long term. The reason is that doing SIP in equity funds for a long period reduces the risk of fluctuations in the stock market. The stock market’s lows and highs create an average return and also benefit from compounding.
Is SIP the best way to invest?
It might not be appropriate to call it the best way of investment but it can definitely be a good way of investment for people with regular income like salaried people and businessmen who have a fixed income each month. Investing through SIP is not heavy on the pocket and by continuously investing small amounts, a good amount can be accumulated in the long term.
What is a benchmark?
Benchmarks are usually Indian stock market indices such as BSE Sensex and Nifty, with which mutual fund returns are compared.
Let’s understand this with an example…
If your particular mutual fund has given a return of 59% in a particular period. At the same time, its benchmark generated returns of 70% during this period, showing that this fund generated fewer returns than the benchmark. The higher a mutual fund’s return relative to the benchmark, the better its performance.
What is market capitalization?
According to market capitalization, i.e. market value, all companies in the country have been divided into 3 categories. Among these, companies with a market capitalization of Rs 20,000 crore or more are called large caps. Their value is less than Rs 20,000 crore but more than Rs 5,000 crore, they are called mid-sized companies.
While small cap companies are those companies whose valuation is less than Rs 5,000 crore. Generally, the top 100 companies by market capitalization are large-cap companies, 100 to 250 are mid-cap companies, and all companies beyond that are small-cap companies.