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

At present, the market is favouring very select quality stocks that have managed to maintain their earnings even in difficult economic circumstances

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.