Large & Mid Cap Funds

Large & Mid-cap funds are mutual funds investing in both large-cap and mid-cap companies. Here, the fund manager will analyze stocks in the top 250 companies and invest accordingly. In short, they are a mix of both types of funds under one umbrella.

According to SEBI rules, the fund manager must invest at least 35% in large-cap stocks and a minimum of 35% in mid-cap stocks. Anything above can be diversified into debt or liquid instruments. As a result, there is more diversification here compared to a large-cap fund or mid-cap mutual fund.

The basic working of any equity fund or even a large & mid cap fund involves pooling of funds from investors. With the collective money received and his knowledge & expertise, the fund manager decides where to invest. This can involve extensive research and market analysis.

Once decided, the fund will invest at least 35% each in both large-cap companies and mid-cap stocks. It means almost 70% of your money will be invested in these companies. With this diversification, the mutual fund gets the desired market exposure and stability of the established companies.

However, the fund manager may diversify more with debt or liquid instruments (like cash) to reduce market risk.

Every investor might find a certain mutual fund attractive, and the same applies to large & mid cap funds as well. Here's who can or should invest in these funds:

Investors with an investment horizon of at least 5 years or more.

Those who wish to invest in both large-cap and mid-cap companies in one fund.

Suitable for those investors who can handle short-term market volatility but prefer lower risk than pure mid-cap or small-cap funds.

Planning to Invest in Large & Mid Cap Mutual Funds?

Here's how you can invest in large and mid cap funds with Anand Rathi.

Akin to every mutual fund available, there are certain points to consider as an investor before investing. It includes;

• Investment Horizon - Like every equity fund, even these funds can yield good when you stay invested for at least 5 years. In short, long-term investment allows mid-cap stocks enough time to enhance the fund's NAV.
• Risk Appetite - With the quality of equity funds, you can expect moderate volatility – less than pure mid-cap funds but more than large-cap ones. When investing, be mindful of the short-term fluctuations that accompany these funds.
• Fund Manager's Strategy - Since these funds are a mix of two equity types, the MF's performance will largely depend on how efficiently the fund manager balances large and mid-cap exposure. Hence, reviewing their past performance and consistency can help with making the right investment.
• Market Conditions - In bull markets, mid-cap stocks could outperform while large caps may offer downside protection during bearish phases. Understanding how the fund behaves across different cycles is important.
• Fund Performance & Portfolio Quality - Lastly, check the historical returns, portfolio composition, and top holdings. A good fund should show steady performance across 3–5 years with quality stocks.

Similar to equity mutual funds, even large & mid cap funds follow the same taxation rules (LTCG and STCG).

• If units are sold in less than 12 months: Gains are taxed at 20% as Short-Term Capital Gains (STCG).
• For units held longer than 12 months: Gains up to ₹1.25 lakh are tax-exempt, and those exceeding ₹1.25 lakh are taxed at 12.5% LTCG.