Key features of large and mid cap fund

benefits of large and mid cap fund
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Investing in India’s stock market can often be confusion, given that one has a plethora of mutual fund categories to choose from. Fortunately, the Securities and Exchange Board of India (SEBI) has streamlined mutual fund classifications, helping investors gain a better understanding of the many available options.

One such categorisation that has caught the attention of many investors is that of large and mid cap funds. This category of mutual funds offers a compelling blend, combining the steadfast reliability of large caps with the spirited potential of mid caps. This unique fusion of attributes caters to a wide array of investor appetites, offering both relative stability compared to other equity funds and growth.

Let’s dive deep into the key features of large and mid cap mutual funds.

  • Table of contents
  1. Key features of large and mid cap funds
  2. Who should consider investing in large and mid cap funds?
  3. FAQ

Key features of large and mid cap funds

Balanced portfolio composition

One of the hallmarks of large and mid cap funds is their innate portfolio diversification. These investment vehicles connect both the relatively steady universe of large cap stocks and the more vibrant world of mid cap stocks. The dual exposure ensures that the funds harness the conservative characteristics of large caps and the aggressive growth potential of mid caps.

SEBI-regulated investment strategy

SEBI mandates a specific investment strategy for this category. Large and mid cap funds must invest a minimum of 35% in equity and equity related instruments of both large cap and mid cap companies. This regulation ensures that the essence of either segment is not overshadowed by the other, thereby allowing the fund to retain a true dual-character.

Dynamic risk-reward spectrum

These funds hold a unique position in the risk-reward matrix. While the large cap component offers relative stability and is generally less susceptible to market volatility, the mid cap portion adds a layer of volatility, with the potential of a relatively better return.

Asset allocation advantage

Large and mid cap fund managers possess greater flexibility in asset allocation. Depending on market conditions, economic forecasts, and company fundamentals, managers can switch the weightage between large cap and mid cap components, aiming to enhance the return potential.

Broader universe for stock selection

Compared to pure large cap fund or pure mid cap funds, the category of large and mid cap funds has a wider reservoir of stocks to choose from. The broader selection universe allows fund managers to cherry-pick stocks across market caps, potentially leading to better portfolio construction.

Potential for better risk-adjusted returns

The inherent diversification of these funds, owing to their exposure to both relatively stable large cap stocks and growth-oriented mid cap stocks, might offer better risk-adjusted returns over time. This means that for a given level of risk, the fund might provide a better return potential compared to other categories that focus solely on one segment of the market cap spectrum.

Resilience during market uncertainties

Historically, during volatile market phases, large caps have shown resilience. Meanwhile, mid-caps have the ability to demonstrate higher growth during bullish markets. The dual nature of large and mid-cap funds ensures that they have the potential to weather market storms while still having the ability to capture significant upside during market upswings. The distinctive features of large and mid cap funds make them a good proposition in the mutual fund space. However, it must be noted that past performance may or may not be sustained in the future. By understanding these nuances, investors can better gauge if these funds align with their investment goals and risk tolerance.

Who should consider investing in large and mid cap funds?

First-time investors: Individuals new to equity investments/investing can consider these funds as a starting point.

Long-term horizon: Like all equity investments, the benefits of large and mid cap funds are better realised over a longer time horizon. Investors should ideally have a time frame of 5 years or more.


When considering mutual fund investments, understanding the nature of the fund is crucial. The unique features of large and mid cap funds make them a good proposition for those seeking a blend of relative stability and growth potential over long term. While the inherent diversification can mitigate the impact during market downturns, the exposure to mid caps can enhance growth potential during bullish phases. However, as with any investment, it is vital to align choices with individual financial goals and risk appetite. Consider consulting a financial advisor to determine if large and mid cap funds fit seamlessly in your investment journey.


What defines a large and mid cap fund?
These funds invest in a mix of large-cap and mid-cap stocks, balancing relative stability, and growth potential.

What are the key features of large and mid cap funds?
Minimum 35% investment in both large cap stocks and mid cap stocks. Diversification, potential for reasonable returns, and a focus on companies of varying sizes are the key features of large and mid cap funds.

Are they suitable for long-term goals?
Yes, they can be suitable for investors aiming for long-term wealth creation.

How do they differ from pure large cap fund or mid cap funds?
Large and mid-cap funds provide a balanced approach, while pure funds focus exclusively on one market cap size.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.

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