Small-cap vs Mid-cap vs Large-cap: Which mutual fund is better in COVID-19 affected markets? Experts give surprising answer

Small-cap vs Mid-cap vs Large-cap: Amid stock market experts batting for the maximum investment in the current market scenario, mutual funds have once again started to gain traction among the investors. However, which type of mutual fund is better — small-cap, mid-cap or large-cap? According to tax and investment experts, equity markets have moved beyond COVID-19 pandemic but till the Coronavirus vaccine is not found, the Chinese virus fear will still loom on the markets. They said that in such a scenario, one should not show much greed and take a middle path and invest in mid-cap mutual funds.

Speaking on the difference among the three categories of mutual funds, Kartik Jhaveri, Manager — Wealth Management a Transcend Consultants said, "Large-cap mutual funds are those which have high volume and which move slowest among the three categories. In mid-cap category mutual funds, the movement is higher than large-cap but lower than small-cap as the small-cap mutual funds are those which have stocks of the small companies which have the lowest volume." 

Speaking on the selection of category that a mutual fund investor may maintain while investing, Jhaveri said, "For long-term investment goals, one should choose small-cap mutual funds, for mid-term investment goals say from 3 years to seven years, a mid-cap mutual fund is the best bet while to avoid losses during the market correction one can diversify one's portfolio by taking some large-cap funds."

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When asked about the mutual funds suitable in current market scenario, Manikaran Singhal, a SEBI registered tax and investment expert said, "Those who want to avoid any risk but want better returns in the current pull-back rally, one should invest a lump sum amount in the mid-cap mutual funds where fall will be limited, in case the market drops.' 

He said that in case the market rises, it will give better returns than the debt funds but lesser returns than the small-cap. But, in case, the market falls, it will help an investor minimise losses and save money to a large extent. However, for long-term mutual fund SIP investors, Singhal batted for a diversified portfolio where more thrust should be on the small-cap funds followed by mid-cap and large-cap funds.