Differences between Large-Cap, Mid-Cover, Small-Cover Funds regarding risk

Differences between Large-Cap, Mid-Cover, Small-Cover Funds regarding risk

  • Providers sort of and you may stature: Large-cap companies are companies that are big and well-established in the equity market. These companies have reliable management and rank among the top 100 companies in the country. Mid-cap companies sit somewhere between large-cap and small-cap companies. These companies are compact and rank among the top 100–250 companies in the country. Finally, small-cap companies are much smaller in size and have the potential to grow rapidly.
  • Industry capitalisation: Large-cap companies have a market cap of Rs 20,000 crore or more. Meanwhile, the market cap of mid-cap companies is between Rs 5,000 crore and less than Rs 20,000 crore. Small-cap companies have a market cap of below Rs 5,000 crore.
  • Volatility: Your investment risk in the stock market is closely related to volatility. If the price of a stock remains reasonably stable even in turbulent markets, it means the stock has low volatility. On the other hand, stocks that see significant price fluctuations at such times are termed as highly volatile. The stocks of large-cap companies tend to be less volatile, which means their prices remain relatively stable even amid turbulence. This makes them relatively low-risk investment options. Mid-cap stocks are slightly more volatile than large-cap stocks and carry somewhat more risk. Small-cap companies are highly volatile and their prices can swing considerably, which increases the risk for investors.
  • Progress potential: The growth potential of large-cap stocks is lower than that of mid- and small-cap stocks. That being said, large-cap stocks are a stable investment option, especially if farmersonly review you have a longer investment horizon. This makes large-caps well suited to investors with low risk appetites. If your risk appetite is moderate, you could look into mid-caps, as these have a slightly higher potential for growth.

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