Investing money is important if you want to grow your wealth over time. One of the most popular and safest ways to invest for beginners is Mutual Funds. In this blog, we will understand what mutual funds are and explain the 3 main market caps: Large Cap, Mid Cap, and Small Cap funds.
What is a Mutual Fund?
A mutual fund is an investment where money is collected from many investors and invested in shares, bonds, or other assets by a professional fund manager. This allows small investors to access a diversified portfolio managed by experts.
- You don’t need to select stocks yourself
- Professionals manage your money
- You can start with small amounts (even ₹500 per month)
What Does “Market Cap” Mean?
Formula:
- Market Cap = Share Price × Total Number of Shares
Based on market cap, companies are divided into 3 categories, and mutual funds invest according to these categories.
1. Large Cap Mutual Funds (Low Risk)
What are Large Cap Funds?
Large cap funds invest in big, well-established companies like:
- Reliance
- TCS
- HDFC Bank
- Infosys
These companies are among the top 100 companies in India.
Features:
- Low risk
- Stable returns
- Good for long-term safety
Who should invest?
- Beginners
- People who want stable growth
- Risk-averse investors
Expected Returns:
📈 Around 10–12% per year (long term)
2. Mid Cap Mutual Funds (Medium Risk)
What are Mid Cap Funds?
Mid cap funds invest in growing companies ranked between 101 to 250 by market cap.
These companies have the potential to become large companies in the future.
Features:
- Medium risk
- Higher growth potential than large caps
- More ups and downs.
Who should invest?
- Investors with some experience
- People who can stay invested for 5–7 years
Expected Returns:
📈 Around 12–15% per year (long term)
3.Small Cap Mutual Funds (High Risk, High Reward)
What are Small Cap Funds?
Small cap funds invest in small emerging companies ranked between 251 to 1000 by market cap.
These companies can grow very fast — or fail.
Features:
- High risk
- Very high return potential
- Highly volatile (price goes up and down a lot)
Who should invest?
- Young investors
- High risk-takers
- Long-term investors (7–10 years)
Expected Returns:
📈 Can be 15%–20%+, but not guaranteed
Large vs Mid vs Small Cap (Quick Comparison)
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Get Free ConsultationFAQ: Mutual Funds
1. What is a mutual fund?
A mutual fund is an investment where money from many investors is pooled together and invested in stocks, bonds, or other assets by a professional fund manager.
2. Which mutual fund is best for beginners?
Large cap mutual funds are considered best for beginners because they are more stable and carry lower risk compared to mid and small cap funds.
3. What is the difference between large cap, mid cap, and small cap funds?
Large cap funds invest in big established companies, mid cap funds invest in growing companies, and small cap funds invest in small emerging companies with higher risk.
4. Can I invest a small amount in mutual funds?
Yes, you can start investing in mutual funds through SIP with amounts as low as ₹500 per month.
5. Are mutual fund investments safe?
Mutual funds are market-linked investments. While they are regulated and transparent, returns are not guaranteed and depend on market performance.