Mutual funds are one of the popular ways of investment among retail investors in India. There are three main categories of mutual funds available in the Indian market. Largecap Funds, Midcap Funds, and Smallcap Funds are the most popular funds.
Smallcap mutual funds invest in smallcap companies and are generally associated with higher risk levels than midcap and largecap funds. The volatility in the stock market impacts their performance. As per reports, the top 10 smallcap funds in India with the highest one-year returns are HDFC Small Cap, Quant Small Cap, Franklin India Smaller Companies, Nippon India Small Cap, Tata Small Cap, HSBC Small Cap, ITI Small Cap, DSP Small Cap, Sundaram Small Cap, Invesco India Smallcap
Midcap funds are mutual funds that invest on companies with a market capitalisation in the middle range of listed stocks. The funds are more stable than the smallcap funds but tend to offer lesser returns. As per Association of Mutual Funds in India (AMFI) data for July, midcap funds saw healthy inflows of Rs 2,512.34 crore, increasing from Rs 1,623.33 crore in July 2023. Here s a quick comparison between Motilal Oswal Midcap Fund and Canara Robeco Mid Cap Fund
Flexi-cap funds are the funds that invest across large-cap, mid-cap and small-cap stocks. Investment in these funds allows the investors to diversify their portfolio across companies of different market capitalisation and mitigate risk. Till July 31, 2023, there were 33 flexi-cap funds. As per Association of Mutual Funds in India (AMFI) data for July, flexi-cap funds saw outflows to the tune of Rs 932 crore. Here s a quick comparison between HDFC Flexi Cap and JM Flexi Cap.
Financial planners say that expense ratio is just one of the factors investors need to look at and it must be used in combination with other factors like performance, fund management, track record of the fund house etc. while choosing a mutual fund scheme.