Largecap schemes outshine mid and small cap schemes

According to mutual fund advisors  due to the sharp fall in midcap and smallcap schemes in the recent correction in the stock market, many investors are contemplating shifting their investments to largecap schemes. However, mutual fund advisors have asked investors to refrain from taking exit calls and investment decisions based on the short-term trends.

“Whenever there is a correction in the market, investors generally tend to get inclined towards the better performing schemes. And this is not a good idea. Chasing returns and trying to time the market will lead to losing mental peace, paying taxes and you will still not surely make money,” says Vivekh Pathak, founder, Finance and You.

All equity mutual fund categories, except largecap and IT sector funds, have given negative returns in the last three months. The largecap category is topping the return chart, after IT sector funds, with 10 per cent returns in one year. The IT funds, on the other, have returned an exceptional 42 per cent in the same period. The smallcap category has been in the negative territory with -1 per cent average annual returns. The midcap category is also struggling, with around 0.80 per cent average returns in a year

Mutual fund advisors say the current phase should serve as a lesson to the investors that no phase lasts forever in the stock market, and investors should not dump their schemes with changing market scenarios. “The market has its ups and downs, but selling off your schemes based on them is not a wise decision. Mid- and small-caps were doing great for a long time and largecaps were suffering in the past, but the tables have turned now,” says Amit Rathi, a certified financial planner. He adds that this phase will also pass. “The small- and mid-caps will perform again but it is imperative that you stay invested for a longer term,” says Amit Rathi.

These advisors also say that the small and midcap investors should remember they have already gotten their returns. “The investors generally enter the small- and mid-cap space with a return expectation of 12-13 per cent annually. They have already got 40 per cent in the last couple of years. So, your goals are not being hindered,” says Vivekh Pathak.