Difference Between Large Cap, Mid Cap And Small Cap Fund

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Overview

Investing in the stock market is an exciting way to grow your wealth, but it can seem complicated when you're starting out. Having a clear grasp of how companies are categorized by market capitalization—large-cap, mid-cap, and small-cap—can make your decisions easier. Each category offers a distinct combination of risk, stability, and growth potential. Let’s look at how these differences help ensure that your investments are in line with your long-term financial objectives.

What is market capitalisation?

Market capitalisation, often referred to as market cap, represents the total value of a company’s outstanding shares in the market. It is determined by multiplying the current share price by the total number of shares in circulation.

Features:

1. Large-cap stocks

Companies ranked among the top 100 by market capitalisation
Typically, well-established with consistent performance
Include blue-chip companies
Known for stability and steady returns

2. Mid-cap Stocks

Companies ranked between 101 and 250 by market capitalisation
Represent growing businesses with significant potential
Higher growth potential than large caps

3. Small-cap Stocks

Companies ranked beyond 250 in terms of market capitalisation
Emerging businesses with niche focus or new ideas
Riskier than mid-cap stocks but have the potential to deliver substantial returns

Differences between large, mid, and small-cap funds:

Company Type	Large Cap	Mid Cap	Small Cap
Company Type	Established and well-known	Growing companies	Emerging, high-potential companies
Growth Potential	Low	Medium	High
Risk	Low	Moderately risky	Highly Risky

Identify your risk appetite:

Low-risk tolerance- large caps,
Higher returns- mid and small-caps.

Allocate wisely:

Build a diversified portfolio that aligns with your risk appetite

Review regularly:

Adjust your portfolio periodically to align with your goals and market trends.

Also read: How to invest in Mutual Funds?

Conclusion

The key to understanding the stock market lies in understanding these three market cap sizes. By understanding the difference and aligning your investments with your portfolio goals, you can create a portfolio that rewards you. Mutual funds offer a convenient way to invest across these segments, providing built-in diversification, professional management, and affordability.

Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.

Mutual Fund investments are subject to market risk. Please read all scheme-related documents carefully. Axis Bank Ltd. is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Any purchase of Mutual Funds by Axis Bank’s customer(s) is purely voluntary and not linked to availment of any other facility from the Bank. This content is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future returns. Readers are advised to consult a qualified financial advisor before making any investment decisions. Terms and Conditions apply.