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What is Large and Mid-cap Fund
Large and Mid-cap Mutual Funds are an open-ended Mutual Fund category that needs an investment of 35% of the total assets in Large-cap and 35% of the total assets in Mid-cap companies. As per the regulations of SEBI, Large-cap companies are ranked at 1st-100th as per their market capitalization while Mid-cap companies are ranked at 101st to 250th as per market capitalization.
Mutual Funds that diversify investments between the Large & Mid capitalization companies can be classified as Large and Mid-cap Funds. Due to its exposure in Mid-cap companies, these Mutual Funds categories are positioned on the higher risk-return plane than Large-cap Funds.
Whereas Large-cap Funds are known to offer stability over various market cycles, their potential to generate higher returns will be limited. Alternatively, Mid-caps will outpace the Large-cap returns in the long run although they can be volatile in a short term.
If you are looking to invest in Large and Mid-cap Funds, then it is important to know what Large and Mid-cap Mutual Funds are and whether you will reap higher benefits from its steady returns capability and growth potential, limited risk profile, provided you choose the best category funds.
How to Large & Mid-cap Mutual Funds Work
These types of Mutual Funds invest in both Large-cap and Mid-cap companies. The Large-cap component invests an important part of the portfolio in companies that are grouped in large market capitalization. They are highly established companies with a strong track record, and typically they have steady corporate governance methods. The corporate houses are highly followed and have generated huge wealth for the investors steadily over a period of time. The Mid-cap component invests in companies that are mid-sized and have the potential to grow into Large-cap firms.
What are the Benefits of Investing in Large & Mid-cap Mutual Funds
- Diversification: Large and Mid-cap Mutual Funds provide the benefit of divesification as they invest in companies of both large and mid capitalization. Thereby allowing investors to take exposure to Mid-caps with lesser risk as compared to a pure Mid-cap Mutual Funds.
- Stability of the Large-caps and growth of Mid-caps: The Large-caps are considered to be the market leaders and big companies, they are financially strong. Alternatively, Mid-caps are the same companies just some years back and challengers. With the Large and Mid-cap Mutual Funds, you will get a mix in one single fund.
- Exposure to Mid-caps without the risk of pure Mid-cap funds: Pure Mid-cap funds are a bit volatile in a short and medium term plan. Many investors are wary of them since they aren’t much comfortable with the volatility and they miss the potential that these fund houses have. Large and Mid-cap Mutual Funds let you take benefit of the growth of Mid-caps that come with lesser risk as compared to pure Mid-cap funds. Large-cap companies bring stability to your returns and at a collective level, its risk stays in control.
Who Should Invest in Large and Mid-cap Stocks
For investors who have a long-term holding and are keen to take a little extra risk, then Large and Mid-cap Funds are the best choices for you. This category of fund invests in the top 250 stocks that are listed in the market.
- Investors looking for superior risk-adjusted outcomes than the pure Large-cap Mutual Funds.
- Perfect for investors looking for growth potential with better stability.
- Suitable for investors looking for exposure to Mid-cap stocks along with some level of stability.
- Investors must have an investment horizon of 5 years or more.
Things to Consider Before Investing in Large & Mid-cap Funds
Large and Mid-cap Funds seek to mix two different categories of companies with medium and large market capitalization. It is important to know that large stocks are not much risky and medium stocks have higher growth potential but also possess a higher risk as they are more volatile as compared to their Large-cap counterparts. Suppose you think that the Mid-cap stocks are a better choice for you and an investor wants some exposure to them, then here are certain things to look in before you plan your investment strategy and understand what is Large and Mid-cap Funds in detail.
Taxation on the Large and Mid-cap Funds
When it comes to redeeming your Large and Mid-cap Fund’s units, you make capital gains. The capital gains will be taxable. However, the taxation rate depends upon how long you have invested in the Equity Funds; this period is known as a holding period. The capital gains that an investor earns on this holding period of less than 1 year are called STCG or short-term capital gains. It will be taxed at a 15% rate.
On the other hand, the capital gains earned on holding above one year will be called LTCG or long-term capital gains. According to the current changes, gains of over Rs. 1 Lakh are taxed between 10% without any indexation benefit.
How can you Invest in Large & Mid-cap Funds Through Nivesh
Any investor can enjoy the benefits of investing through Nivesh in the following easy steps:
- Create an account in Nivesh by providing your basic KYC details. (If you already have an account then just login into your account)
- On your portfolio page click on the Buy New tab at the right top corner of the screen.
- Select the category and choose the funds you want to purchase.
- If you already know the name of the fund to buy, then you can search the particular fund through Quick Order.
- Fill the transaction details and confirm. You can place up to 5 orders in one go.
- You can make payment through your registered account through UPI, Direct Pay, or NEFT/ RTGS , Bank Mandate or Cheque. For same-day NAV, select UPI, Direct Pay or NEFT / RTGS as other payment options may take a few days to clear, Nodal account takes about 1-2 days to clear payment from the approved mandate and cheque takes about 2-5 days in clearing due to which you will not get the same-day NAV.
Frequently Asked Questions (FAQs)
1. Are Mid-Cap Funds Similar to Large & Mid-cap Funds?
Large and Mid-cap funds invest in equity and equity-related instruments of Mid-cap and Large-cap companies. However, Mid-cap Mutual Funds invest just in Mid-cap companies making them more risky and volatile.
2. What is the Minimum Amount to Invest in Large & Mid-cap Funds?
When it comes to Mutual Funds investment, you don’t need to invest a huge amount of money. The minimum investment in such funds through the Systematic Investment Plan (SIP) route can be as low as Rs. 100 and Rs. 1,000 for a lump sum, however, this varies from scheme to scheme.
3. Is There any Lock-in Period in Large & Mid-cap Funds?
SIPs offer complete flexibility on the investment amount, monthly & quarterly investment choice, and investment tenure. There aren’t any lock-in periods in these funds.
4. Is There any Tax on Large & Mid-cap Funds?
While redeeming Large & Mid-cap funds units, you make capital gains. The capital gains will be taxable and the taxation rate depends upon how long you invested in the equity funds; it is called a holding period. If the holding period is of one year or less then the gains are taxed at 15% and these gains are called Short-Term Capital Gains (STCG). And gains on one or more year holding are terms as Long-Term Capital Gains (LTCG), gains of above Rs. 1 Lakh are taxed at 10% with no indexation benefit.
