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Mutual Funds Evolve: Navigating the Shifting Landscape of Large & Mid Cap Investments
7 Sep
Summary
- Mutual fund schemes to focus more on large or mid cap stocks based on risk tolerance
- 35% mandatory investments in mid cap stocks make these funds riskier than large cap funds
- Fund managers have flexibility to adjust large cap and mid cap exposure based on market conditions
According to the article, the landscape of large and mid cap mutual fund schemes is set to evolve over the coming years. Some schemes will be inclined towards large cap stocks, while others will lean more towards mid cap stocks. This shift is expected to make it easier for investors to choose the right scheme based on their risk tolerance.
Large and mid cap mutual funds are required to invest a minimum of 35% of their total assets in large cap companies and another 35% in mid cap stocks. However, this definition does not tell the whole story. The 35% mandatory investment in mid cap stocks makes these funds riskier than pure large cap schemes, but less risky than pure mid cap funds. The 35% allocation to large cap stocks also provides some stability, but these funds are still riskier than large cap-focused schemes.
Importantly, the fund managers have the flexibility to decide where to invest the remaining 30% of the corpus. If they believe the large cap space is more attractive, they may allocate more to large cap stocks. Conversely, if they see mid cap and small cap stocks as poised for growth, they may increase exposure to those segments. This flexibility can significantly impact the overall risk profile of the schemes.
