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Difference Between Large Cap, Mid Cap and Small Cap Funds.. What is Market Capitalization? The stock market determines the worth of a company through its market capitalisation or market cap. Market capitalisation is the market value of the shares held by the company’s shareholders. The market value of a company is also defined by the number of shares outstanding. Market capitalisation is of three types as per the regulations established by the Securities Exchange Board of India (SEBI): · Large Cap · Mid Cap · Small Cap In this article, you will learn about the different types of funds based on their market capitalisation. What is a large-cap company? The top 100 companies that are listed on the stock exchange based on their market cap are termed as large cap companies. Large cap funds hold the stocks that form part of large cap companies. Since the market value of these companies is high i.e. around Rs. 20,000 crore or more, these are also known as “blue chip companies”. What are mid-cap companies? The companies that are ranked from 101 to 250 according to their market cap are known as mid cap companies. These companies have a market cap of around Rs. 5,000 to Rs. 20,000 crores. Mutual funds that hold stocks of these companies are known as mid cap funds. The mid cap funds are considered riskier than the large cap funds. What is small-cap companies? The companies that are ranked from 251st position onwards and have a market cap of below Rs. 5,000 crores are known as small cap companies. The mutual funds that hold shares of small cap companies are known as small cap funds. What Is The Difference Between Large Cap, Mid Cap and Small Cap Funds? · Risk Large cap funds are considered less risky in comparison to the mid and small cap funds. Mid cap funds are known to carry lesser risk than the small cap funds but are considered slightly risker than the large cap funds. Small cap funds are known to be the riskiest among the two but they carry tremendous growth potential. · Volatility and Liquidity Large cap funds are less volatile. They are known to offer significant returns and have good liquidity. Mid cap funds are moderately volatile and moderate liquid. While the small cap funds have less liquidity and are more volatile. · Returns Large cap funds are known to provide consistent and steady returns. Mid cap funds are known to carry more risk than the large cap funds so they have the potential to offer higher returns. Small cap funds being the riskiest among the two, have the potential to offer outstanding returns. · Where to Invest? Large cap funds can be an ideal option for conservative investors in long term. For investors willing to bear some risk with long term horizon, mid cap funds can be an ideal choice. Small cap funds are ideal for high-risk investors in the short term. · Growth The companies that are part of large cap funds are known for generating stable growth and returns. While mid cap funds have moderate potential for growth. Small cap funds can deliver higher growth than large and mid-cap funds. Conclusion In simple words, the choice to invest in these funds depends on your risk profile and return expectations. Before investing in any of these funds, it is wise to determine what you are expecting from your investment. Open a demat account with Indira Securities to begin trading today. Download the Indira Securities Mobile App TradeInsta