Large & Mid Cap Mutual Funds are equity-oriented mutual funds that offer you an opportunity to create wealth by investing in an optimum mix of large-cap and mid-cap stocks, i.e., the leaders of today as well as the future leaders. Thus, you benefit from the stability of large-caps and the high growth potential of mid-caps through a single fund.
This article will reveal PersonalFN’s list of best Large & Mid Cap Mutual Funds to invest in 2023. But first, here are some basic details about the category.
As per SEBI norms, Large & Mid Cap Mutual Funds are mandated to invest a minimum of 35% of their assets, each in equity and equity-related instruments of large-cap and mid-cap companies. In other words, these funds invest at least 70% of their assets in the top 250 companies in terms of market capitalisation.
The fund manager/s can decide where the remaining capital needs to be allocated based on how the market is performing or expected to perform. Most Large & Mid Cap Mutual Funds invest around 50-60% of their assets in large-cap stocks and 35-40% in mid-cap stocks.
What are the advantages of investing in Large & Mid Cap Mutual Funds?
If you have a look at the past market data, you will find that performance across large-caps and mid-caps differs significantly over any given period – sometimes large-caps outperform, while other times it could be mid-caps. Hence, diversifying investment across large-cap and mid-cap stocks can generate better risk-adjusted returns.
While large-caps are known to provide stability across market cycles, their potential to generate very high returns is limited. On the other hand, mid-caps can outpace large-cap returns over the long run, though they can be highly volatile in the short term.
By investing in Large & Mid Cap Mutual Funds, you can benefit from the steady return capability of large-caps and the high growth potential of mid-caps, at a reasonable degree of risk, provided you select the best funds in the category.
Top stock holdings of Large & Mid Cap Mutual Funds
AUM data as of December 31, 2022 (Source: ACE MF)
What are the risks involved in investing in Large & Mid Cap Mutual Funds?
Since Large & Mid Cap Mutual Funds invest in equities, they are prone to market fluctuations. With predominant exposure to both large-cap and mid-cap stocks, these funds are riskier than pure Large Cap Funds but less risky than pure Mid Cap Funds and Multi Cap Funds that invest across market capitalisation. This means Large & Mid Cap Mutual Funds can offer better returns than Large Cap Mutual Funds, albeit at a slightly higher risk.
To mitigate the risk, it is advisable to opt for the Systematic Investment Plan (SIP) mode when you invest in the best Large & Mid Cap Mutual Funds.
Who should invest in Large & Mid Cap Mutual Funds?
If you are seeking stability of Large Cap Mutual Funds but do not want to miss out on the high-growth potential of Mid Cap Mutual Funds, then Large & Mid Cap Mutual Funds can form a part of your core equity mutual fund portfolio. Ensure that you have a high risk appetite, the appetite to bear the impact of short-term volatility, and a long-term investment horizon of at least 5 years.
How are Large & Mid Cap Mutual Funds taxed?
Large & Mid cap mutual funds are equity-oriented mutual funds, and hence they follow equity taxation. The short-term holding period for Large & Mid Cap Mutual Funds from a tax perspective is 12 months. So, if you sell your Large & Mid Cap Fund units before 12 months, you pay short-term capital gains (STCG) tax of flat 15% on the gains.
On the other hand, if you sell your Large & Mid Cap Mutual Fund units after completing one year, you pay a long-term capital gains tax of 10%, but only if your gains exceed Rs 1 Lakh in a financial year. If your long-term gains are below Rs 1 Lakh and you redeem after completing one year, then you do not have to pay any tax on these gains.
Which are the best Large & Mid Cap Mutual Funds to invest in 2023?
Let us now take a look at the three best Large & Mid Cap Mutual Funds to invest in 2023.
List of Best Large & Mid Cap Mutual Funds to Invest in 2023
Past performance is not an indicator for future returns Data as of January 20, 2023. Direct Plan-Growth option considered (Source: ACE MF)
Best Large & Mid Cap Mutual Fund to invest in 2023 #1: Canara Robeco Emerging Equities Fund
Launched in March 2005, Canara Robeco Emerging Equities Fund is one of the popular schemes in the Large & Mid Cap Mutual Fund category. Canara Robeco Emerging Equities Fund maintains a well-diversified portfolio of stocks spread across sectors and balanced across large-cap and mid-cap segments. The fund has recorded superior long-term performance and stands strong in the list of prime contenders in the Large & Mid Cap Mutual Fund category.
Fund Snapshot – Canara Robeco Emerging Equities Fund
Past performance is not an indicator of future returns Portfolio data as of December 31, 2022 Returns and NAV data as of January 20, 2023. Regular Plan – Growth Option considered (Source: ACE MF)
The fund has outperformed many of its peers by a reasonable margin over the longer 3-year, 5-year, and 7-year time periods. It employs sound risk management techniques that have helped the fund do well to curb the downside risk during market corrections. Moreover, the performance in the past upside market cycles has been far superior to the benchmark as well as the category average.
Given the uncertain market environment, it played safe by not placing concentrated bets towards any particular sector or set of stocks. Canara Robeco Emerging Equities Fund has proven its ability to generate decent risk-adjusted returns for its investors and is expected to maintain its superior performance track in future as well.
Best Large & Mid Cap Mutual Fund to invest in 2023 #2: Kotak Equity Opportunities Fund
Launched in September 2004, Kotak Equity Opportunities Fund is primarily an opportunities-style fund that looks for investment opportunities across various sectors based on the performance and growth potential of companies within the sectors. The fund decides the respective allocation between large caps & mid caps depending on the choice of sectors, business environment & valuations, and the overall macroeconomic situation.
Fund Snapshot – Kotak Equity Opportunities Fund
Past performance is not an indicator of future returns Portfolio data as of December 31, 2022 Returns and NAV data as of January 20, 2023. Regular Plan – Growth Option considered (Source: ACE MF)
Kotak Equity Opportunities Fund has a track record of outperforming the benchmark and the category average over longer time periods. While the fund has managed the downside risk well and stood strong during bearish and highly volatile market phases, it has shown fair performance during positive market trends.
Kotak Equity Opportunities Fund carries an impressive track record under the supervision of Mr Harsha Upadhyaya and has turned out to be a rewarding proposition for its long-term investors. The superior long-term performance of the fund has been driven by its smart sector and stock selection strategy. The fund manager has done well to keep overall volatility at a reasonable level and has delivered in terms of risk-adjusted returns.
Best Large & Mid Cap Mutual Fund to invest in 2023 #3: Quant Large & Mid Cap Fund
Launched in December 2006, Quant Large & Mid Cap Fund is an actively managed small-sized scheme in the Mid-cap Fund category and follows aggressive investment strategies. Despite being small in size, Quant Large & Mid Cap Fund has registered extraordinary performance in recent years and handsomely rewarded its investors. Quant Large & Mid Cap Fund is now a top-performing Mid Cap Fund with superior returns across time frames. More importantly, Quant Large & Mid Cap Fund stands out in the category in terms of risk-adjusted returns.
Fund Snapshot – Quant Large & Mid Cap Fund
Past performance is not an indicator of future returns Portfolio data as of December 31, 2022 Returns and NAV data as of January 20, 2023. Regular Plan – Growth Option considered (Source: ACE MF)
Quant Large & Mid Cap Fund constantly looks for opportunities across stocks and sectors, which has resulted in significant alpha for its investors. The fund is also quick in its approach to shift allocation between large-cap and mid-cap stocks depending on the market conditions. Accordingly, it has recorded a higher churn rate of over 200 to 400% in the last one year.
Quant Large & Mid Cap Fund has proved its ability to limit downside risk during depressed market conditions in the past two bear phases while it has also stood among top performers in the category in the ongoing bull phases. This highlights the fund’s ability to reward investors with superior gains over the long run.
This completes our list of the best Large & Mid Cap Mutual Funds to invest in 2023.
