Considering investing in MFs? 9 best large and mid-cap mutual funds to invest in
Diversification: By investing in a combination of large-cap and mid-cap stocks, these funds effectively mitigate risk through diversification. Growth potential: Over the long term, such mutual funds have the potential to yield higher returns compared to other types of mutual funds, tapping into the growth prospects of mid-cap stocks. Stability: The inclusion of large-cap stocks in the portfolio adds a layer of stability to these kinds of funds, making them more resilient than pure mid-cap funds.
Tax efficiency: Investors can benefit from tax efficiency, as the long-term capital gains from these mutual funds are taxed at a lower rate than short-term capital gains. According to SEBI regulations, large and mid-cap mutual funds must designate a minimum of 35 percent of their assets to equity and equity-related instruments of large-cap and mid-cap companies, respectively. Essentially, this requirement translates to these funds having to invest at least 70 percent of their assets in the top 250 companies based on market capitalisation.
The purpose of this requirement is to maintain the authenticity of large & mid cap mutual funds, ensuring that investors receive exposure to the foremost companies in the market. Additionally, this guideline serves to mitigate risk by focusing on companies that are typically more established and boast a longer track record. The remaining can be directed towards alternative instruments, including debt securities and money market instruments.
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