Key Differences between Large, Mid and Small cap Funds

Investors looking for investment sources that may help them in churning some growth may consider investing in equity mutual funds. Equity mutual funds are a subcategory of mutual funds where investors may consider investing if they wish to get exposure to equity investment. Like all mutual funds, equity funds may hold the potential to allow investors with earning some capital gains, but nothing can be guaranteed. That’s because equity funds predominantly invest in the equity market and equity related instruments. It is evident that investments made in equities are exposed to market volatility, and hence, returns from equity investments are never guaranteed.

Equity mutual funds are further subcategorized as per the market capitalization of companies they invest in. These funds can be categorized as large cap, mid cap, small cap funds, etc. Before we get into further details, let’s a get few basic concepts cleared.

What is market capitalization?

To put it in simple words, market capitalization is the value of a company that is traded on the stock market, calculated by multiplying the total number of shares by the present share price.. Market capitalization can be further understood on the basis of this simple formula. It is commonly referred to as market cap where ‘cap’ stands for capitalization.

Market cap of a company= Current market price of one share * Total number of outstanding shares

Here’s an example to help you understand market capitalization in a better way:

If Tata Motors’ current value of one share is Rs. 5000, and the total outstanding publicly traded shares the company owns is 1 crore, then the company’s market cap value is Rs.5000 * 1 crore shares which equals to Rs. 5000 crores.

The market capitalization of any company may or may not remain constant. That’s because the per-share value of the publically traded company keeps fluctuating and so can its market capitalization. In a similar way, depending on purchase/sale, the number of outstanding shares may change over a period of time.

Key differences between large cap, mid cap, and small cap companies

Large cap, mid cap, and small cap fund all predominantly invest in equity and equity related instruments. Hence, they all carry some amount of risk with them. This is why investors are expected to have a defined investment goal so that they are able to identify which investment avenue to opt for in order to fulfill their goal.

Mutual fund investments must always be discussed with a financial advisor who may help an investor in making an informed decision. However, you can also consider investing in Axis Mid Cap Fund. Investors who keep their investments aligned with their, their investment horizon and risk appetite, have a better chance of getting a step closer to their ultimate financial goal.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.