Retail investor should keep an eye on mid- and small-cap funds too

With year-to-date category average return of 10.82 per cent, large-cap funds are the winning category of 2019. Category average returns of mid- and small-cap funds are much poorer in comparison. Retail investors have a tendency to chase past returns. With large-cap funds doing well currently, there is the risk that investors, especially new ones, may only invest in funds belonging to the large-cap category. This would not be right. While the bulk (60-70 per cent) of a conservative or moderate risk investor’s portfolio should be invested in large-cap funds, he also needs to diversify into mid- and

small-cap funds.

 

At present, the market is favouring very select quality stocks that have managed to maintain their earnings even in difficult economic circumstances. But as and when an economic recovery takes place, earnings will become more broad-based. Mid- and small-caps will also begin to perform then. Investors need to position themselves for such an upturn.

 



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