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Should you switch from smallcap or midcaps to large-cap schemes?

Should you switch from smallcap or midcaps to large-cap schemes?

In the recent stock market correction, the sharp fall has seen in the midcap and smallcap schemes. And suddenly many investors are in love with large-cap mutual fund schemes. Many investors are looking for a switch from midcap or smallcap schemes to large-cap schemes. However, mutual fund advisors are asking investors to refrain from investment decision based on the recent stock market trend.

According to Rajeev Sakhuja, MD & CEO, PTIC INDIA – Financial Planner in Delhi,”Whenever there is a correction in the stock market, the investor look for a better performing fund. But this is not a good idea. Running after the market returns will lead you to lose your mental peace and you will still not surely make money.”

In the last three months, all equity mutual funds have given negative returns except large-cap and IT sector funds. The IT sector funds topped the chart with an exceptional return of 42 percent in one year. And after that, the large-cap fund topped with a 10 percent return in the same period. The midcap and small-cap funds are struggling to give a good rate of return. The midcap funds average return is 0.80 percent where smallcap funds average returns is in the negative (average -1 percent) 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 based on the market trend, selling your funds is not a wise decision. In the past midcap and smallcap were performing great and large-cap were suffering. And now the market has turned. The smallcap and midcap will perform better again. But it is important that you invested for a longer term.

These advisors also say that the small and mid-cap 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 percent annually. They have already got 40 percent in the last couple of years. So, your goals are not being hindered.

The fundamental rule of investing in equity mutual funds is that you invest to meet your long-term goals. The advisors suggest that investors should not give up their schemes during the market corrections. If you want to invest in a large-cap or an IT sector fund, you can. But don’t switch your money from a small- or mid-cap to a large-cap for returns. Stick to your risk appetite and choose your schemes accordingly.

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