PGIM India Large and Midcap Fund in the past month: PGIM India Large and Midcap Fund and Bajaj Finserv Large and Midcap Fund. These funds aim to invest in a mix of large and mid-cap stocks, which are expected to offer higher growth potential and lower volatility than pure large-cap or mid-cap funds. But are these funds worth investing in? What are the benefits and risks of investing in large and mid-cap funds? How do these funds compare with each other and with the existing large and mid-cap funds in the market? To answer these questions, we spoke to three experts from the mutual fund industry and asked them to share their views and insights on these funds.
Expert 1: Anil Kumar, Fund Manager at PGIM India Large and Midcap Fund
Anil Kumar is the fund manager of the PGIM India Large and Midcap Fund, which was launched on January 15, 2024. He has over 15 years of experience in the equity markets and has been managing various equity schemes at PGIM India Mutual Fund since 2017. He shared his views on the fund and its investment strategy as follows:
What is the objective and strategy of the PGIM India Large and Midcap Fund?
The objective of the fund is to generate long-term capital appreciation by investing predominantly in equity and equity-related securities of large and mid-cap companies. The fund follows a bottom-up, research-driven approach to selecting stocks across sectors and market capitalizations based on their growth potential, valuation, and quality. The fund also uses dynamic asset allocation to adjust its exposure to large and mid-cap stocks based on market conditions and opportunities.
What are the benefits of investing in large and mid-cap funds?
Large and mid-cap funds offer a balance of growth and stability to investors. Large-cap stocks provide stability and resilience in volatile markets, while mid-cap stocks offer higher growth potential and alpha generation in favorable markets. By investing in a mix of large and mid-cap stocks, the fund aims to capture the best of both worlds and deliver superior risk-adjusted returns over the long term.
What are the risks of investing in large and mid-cap funds?
The risks of investing in large and mid-cap funds are similar to the risks of investing in any equity fund. These include market risk, liquidity risk, concentration risk, and regulatory risk. The fund mitigates these risks by following a diversified and disciplined investment process, which involves rigorous research, valuation analysis, risk management, and portfolio monitoring.
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How does the PGIM India Large and Midcap Fund compare with the Bajaj Finserv Large and Midcap Fund and other existing large and midcap funds in the market?
The PGIM India Large and Midcap Fund is a differentiated and unique offering in the large and midcap categories. The fund has a flexible and dynamic investment style, which allows it to adapt to changing market conditions and opportunities.
The fund also has a strong and experienced fund management team, which has a proven track record of delivering consistent and superior performance across various equity schemes. The fund also has a competitive and transparent fee structure, which ensures that the investors get the best value for their money. The fund is suitable for investors who have a long-term horizon and a moderate to high risk appetite and who are looking for a balanced and diversified exposure to the large and mid-cap segment of the Indian equity market.
Expert 2: Ravi Sharma, Fund Manager at Bajaj Finserv Mutual Fund
Ravi Sharma is the fund manager of the Bajaj Finserv Large and Midcap Fund, which was launched on February 1, 2024. He has over 12 years of experience in the equity markets and has been managing various equity schemes at Bajaj Finserv Mutual Fund since 2019. He shared his views on the fund and its investment strategy as follows:
What is the objective and strategy of the Bajaj Finserv Large and Midcap Fund?
The objective of the fund is to generate long-term capital appreciation by investing predominantly in equity and equity-related securities of large and mid-cap companies. The fund follows a top-down, macro-driven approach to selecting stocks across sectors and market capitalizations based on their growth prospects, competitive advantage, and sustainability. The fund also uses strategic asset allocation to maintain a minimum of 35% exposure to large-cap stocks and a minimum of 35% exposure to mid-cap stocks at all times.
What are the benefits of investing in large and mid-cap funds?
Large and mid-cap funds offer diversified and optimal exposure to the Indian equity market. Large-cap stocks provide scale and stability in uncertain markets, while mid-cap stocks provide innovation and differentiation in emerging markets. By investing in a combination of large and mid-cap stocks, the fund aims to benefit from the structural growth and cyclical recovery of the Indian economy and deliver consistent and superior returns over the long term.
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What are the risks of investing in large and mid-cap funds?
The risks of investing in large and mid-cap funds are similar to the risks of investing in any equity fund. These include market risk, liquidity risk, concentration risk, and regulatory risk. The fund mitigates these risks by following a robust and prudent investment process that involves comprehensive research, valuation discipline, risk management, and portfolio review.
How does the Bajaj Finserv Large and Midcap Fund compare with the PGIM India Large and Midcap Fund and other existing large and midcap funds in the market?
The Bajaj Finserv Large and Midcap Fund is a distinctive and attractive offering in the large and midcap categories. The fund has a simple and clear investment style, which allows it to focus on the fundamental drivers of stock performance. The fund also has a talented and dedicated fund management team that has rich experience and expertise in the equity markets.
The fund also has a reasonable and transparent fee structure, which ensures that the investors get the best value for their money. The fund is suitable for investors who have a long-term horizon and a moderate to high risk appetite and who are looking for diversified and optimal exposure to the large and mid-cap segment of the Indian equity market.
Expert 3: Neha Jain, Independent Financial Advisor
Neha Jain is an independent financial advisor who has been providing financial planning and investment advisory services to individuals and corporations for over 10 years. She shared her views on large and mid-cap funds and their suitability for investors as follows:
What are the benefits of investing in large and mid-cap funds?
Large and mid-cap funds are a good option for investors who want to invest in the equity market but are not comfortable with the high risk and volatility of pure large-cap or mid-cap funds. Large and mid-cap funds offer a middle ground between the two extremes and provide a balanced and diversified portfolio of stocks, which can deliver steady and healthy returns over the long term.
What are the risks of investing in large and mid-cap funds?
The risks of investing in large and mid-cap funds are similar to the risks of investing in any equity fund. These include market risk, liquidity risk, concentration risk, and regulatory risk. However, these risks can be reduced and managed by choosing a reputed and reliable fund house, a skilled and experienced fund manager, and a well-researched and diversified fund portfolio. Investors should also monitor and review their fund performance regularly and make necessary changes as per their risk profile and financial goals.
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How do you choose the best large- and mid-cap fund for your portfolio?
There is no one-size-fits-all answer to this question, as different funds may suit different investors based on their risk appetite, return expectation, time horizon, and investment objective. However, some of the common factors that investors should consider while choosing a large or mid-cap fund are:
Fund house reputation and track record: Investors should choose a fund house that has a strong brand name, a long history, a large asset base, and good corporate governance. These factors indicate the quality and credibility of the fund house and its ability to manage the funds efficiently and effectively.
Fund manager skill and experience: Investors should choose a fund manager who has a high qualification, deep knowledge, vast experience, and a proven performance in the equity markets. These factors indicate the competence and confidence of the fund manager and his or her ability to select the best stocks and manage the fund portfolio optimally.
Fund performance and consistency: Investors should choose a fund that has a high return, a low risk, a high alpha, and a low beta compared to its benchmark and category peers.
Fund portfolio and diversification: Investors should choose a fund that has a well-balanced and diversified portfolio of stocks across sectors and market capitalizations. These factors indicate the quality and variety of the fund portfolio and its ability to reduce concentration and correlation risk among the stocks.
Fund expense ratio and exit load: Investors should choose a fund that has a low expense ratio and exit load compared to its category peers. These factors indicate the cost and convenience of investing in the fund and its impact on the net returns of the investors.
Based on these factors, investors can compare and evaluate the PGIM India Large and Midcap Fund and the Bajaj Finserv Large and Midcap Fund with each other and with other existing large and midcap funds in the market and choose the best fund that suits their portfolio and preferences.
Conclusion
Large and mid-cap funds are a good option for investors who want to invest in the equity market but are not comfortable with the high risk and volatility of pure large-cap or mid-cap funds. These funds offer a balance of growth and stability, diversified and optimal exposure, and a steady and healthy return over the long term. However, investors should be careful and cautious while choosing a large and mid-cap fund and consider various factors such as fund house reputation, fund manager skill, fund performance, fund portfolio, fund expense ratio, and fund exit load. Investors should also consult their financial advisors before making any investment decisions.
What is the difference between an SIP and a lump-sum investment?
Understanding SIP vs. Lump Sum Investment
A systematic investment plan (SIP) and lump sum investment represent two distinct approaches to investing in mutual funds, each with its own set of characteristics and benefits.
1. What is a SIP?
A SIP entails investing a fixed amount at regular intervals, such as monthly or quarterly, into mutual funds.
With a SIP, investors benefit from rupee cost averaging, which allows them to purchase more units of the fund when prices are low and fewer units when prices are high.
This strategy helps reduce the average cost per unit over time, potentially leading to higher returns in the long run.
2. What is a lump-sum investment?
A lump-sum investment involves investing a large amount of money into mutual funds at once, as opposed to spreading it out over time.
Unlike SIP, lump-sum investment exposes investors to the risk of timing the market, meaning they may invest when prices are high and potentially incur losses if the market declines.
3. Key Differences:
Rupee Cost Averaging: SIPs allow investors to benefit from rupee cost averaging, mitigating the impact of market volatility on their investment.
Market Timing Risk: Lump sum investments carry the risk of mistiming the market, potentially resulting in losses if the market undergoes a downturn shortly after investment.
Suitability: SIPs are well-suited for investors with a long-term horizon, moderate to high risk tolerance, and a desire for disciplined, regular investing. Lump-sum investments are ideal for investors with a substantial amount of capital and a deep understanding of market trends.
4. Suitability:
SIP: Suitable for investors seeking disciplined, regular investment with a long-term horizon and a moderate to high risk appetite.
Lump Sum: Ideal for investors with significant capital to invest and a comprehensive understanding of market dynamics and trends.
While SIPs offer the advantages of rupee cost-averaging and disciplined investing, lump-sum investments may appeal to those with a large capital base and market expertise. It’s crucial for investors to assess their financial goals, risk tolerance, and investment horizon before choosing between SIP and lump-sum investment options.
FAQs
Q. What are large and mid-cap funds?
Ans. Large and mid-cap funds are mutual funds that invest in a mix of large and mid-cap stocks. Large-cap stocks are the stocks of the top 100 companies by market capitalization, while mid-cap stocks are the stocks of the next 150 companies by market capitalization. These funds aim to offer a balance of growth and stability, a diversified and optimal exposure, and a steady and healthy return over the long term.
Q. What benefits does investing in funds focused on large and mid-cap stocks offer?
Some of the advantages of investing in large and mid-cap funds are:
Ans. They can capture the best of both worlds: large-cap stocks provide stability and resilience in volatile markets, while mid-cap stocks offer higher growth potential and alpha generation in favorable markets.
They can benefit from the structural growth and cyclical recovery of the Indian economy, as large and mid-cap stocks represent various sectors and industries that drive economic growth.
They can reduce the concentration and correlation risk among the stocks as they invest in a well-balanced and diversified portfolio of stocks across sectors and market capitalizations.
They can deliver superior risk-adjusted returns over the long term, as they can adapt to changing market conditions and opportunities.
Q. What are the disadvantages of investing in large and mid-cap funds?
Some of the disadvantages of investing in large and mid-cap funds are:
Ans. They are subject to market risk, liquidity risk, concentration risk, and regulatory risk as they invest in equity and equity-related securities, which are volatile and unpredictable in nature.
They may underperform pure large-cap or mid-cap funds in certain market scenarios, as they may not be able to fully capture the upside or downside of either segment.
They may have a higher expense ratio and exit load than pure large-cap or mid-cap funds, as they may incur higher transaction and management costs due to their dynamic and diversified investment style.
Q. How do you choose the best large- and mid-cap fund for your portfolio?
Ans. There is no one-size-fits-all answer to this question, as different funds may suit different investors based on their risk appetite, return expectation, time horizon, and investment objective. However, some of the common factors that investors should consider while choosing a large or mid-cap fund are:
Fund house reputation and track record: Investors should choose a fund house that has a strong brand name, a long history, a large asset base, and good corporate governance.
Fund manager skill and experience: Investors should choose a fund manager who has a high qualification, deep knowledge, vast experience, and a proven performance in the equity markets.
Fund performance and consistency: Investors should choose a fund that has a high return, a low risk, a high alpha, and a low beta compared to its benchmark and category peers.
Fund portfolio and diversification: Investors should choose a fund that has a well-balanced and diversified portfolio of stocks across sectors and market capitalizations.
Fund expense ratio and exit load: Investors should choose a fund that has a low expense ratio and exit load compared to its category peers.
