GUIDESMUTUAL FUNDS
GUIDES
Diversifying your portfolio with mutual funds? If you can handle more risk, consider small-cap or mid-cap funds for higher growth potential. But first, learn the difference between these options.
Small-cap mutual funds invest in publicly traded small-cap companies (i.e., companies ranked from 251st position in terms of decreasing market capitalisation). These companies have exceptional growth potential, but are also highly risky due to higher volatility. Besides small-cap stocks, the fund may also include mid-cap or large-cap stocks, debt and money market instruments in its portfolio.
Mid-cap mutual funds invest mainly in mid-cap companies, ranked 101st to 250th in decreasing market capitalization. A small portion of assets are diversified across small-cap or large-cap stocks, debt securities, and money market instruments.
In conclusion, the seven key differences between small-cap and mid-cap funds highlight the unique characteristics and potential benefits of each. Small-cap funds, typically investing in companies with smaller market capitalizations, offer high growth potential but come with increased volatility and risk. On the other hand, mid-cap funds, which invest in medium-sized companies, strike a balance between growth and stability. They offer considerable growth prospects with less volatility compared to small-cap funds. Therefore, the choice between small-cap and mid-cap funds should be based on individual investment goals, risk tolerance, and time horizon. It’s always recommended to diversify your portfolio and consult with a financial advisor before making investment decisions.
Mutual Fund investments on Fi are simple & commission-free. With its intuitive user interface, suited for new & seasoned investors, one can select from over 900 direct Mutual Funds. Plus, Fi is 100% secure as it functions under the guidance of epiFi Wealth, a SEBI-registered investment advisor. To help simplify the steps involved, you can invest daily, weekly, or monthly via automatic payments or SIPs — created with one tap. Moreover, Fi offers 100% flexibility with zero penalties for missed payments.
A small-cap fund invests in small-cap stocks of listed companies ranked 251st or lower in decreasing market cap. A mid-cap fund invests in mid-cap stocks of companies ranked 101st to 250th.
Small-cap funds may have more growth potential than mid-cap funds, but the latter may be a comparatively less risky option.
Yes, small-cap funds are typically considered highly risky because their prices are highly volatile and vulnerable to market risks.
That depends entirely on your financial goals and risk profile. If you want to increase the potential for greater capital growth, small-cap funds may be suitable. But if you want a less risky option, mid-cap funds could be a better choice.
LAST EDITED BY 
