Should you switch from multi cap to large & mid cap funds? regularly asks mutual fund advisors and financial planners every week for a list of frequently asked queries by their clients. Often, these questions would be very topical, something that may be worrying many regular investors. The idea is to present the questions and the response of these advisors/planners to those questions for the benefit of our readers. This week we spoke to Subir Jha, Founder, BuckSpeak, a financial planning firm, based in Hyderabad.

Questions asked by investors:

1. Should we stop our investments in multi cap funds after new Sebi norms?
2. Are large & mid cap funds better for investments?
3. Should risk averse investors choose large & mid caps over multi cap funds now?

His response to his clients:
The recent SEBI regulation has been blown out of proportion, without people waiting for further clarity from the stakeholders. SEBI has laid down credible options to ensure a smooth transition. So, I don’t think investors should do anything to their schemes at this point. New investments surely can wait.

Will Large & mid cap emerging as a better alternative? I don’t agree with that. Reason being, I don’t think any fund/ fund category is ‘better’ than the other. Key is whether it aligns with the investor’s risk and return expectation. So, don’t start pumping money just because people are saying that’s better than this. Having said that, from a practical point of view, Large & Mid Cap might emerge as the largest category in times to come, unless we have a new category coming up (like Flexi Cap/ ESG).

Large & Mid Cap is suited for investors willing to look beyond the large caps and wanting lesser volatility then mid-caps. In layman terms, potentially higher return than large cap and lower volatility compared to mid-caps. Ideally this category could be the 1st/2nd fund in any investor’s portfolio.

However, I would recommend investors in multi caps to avoid knee jerk reactions and track the path your multi cap is taking. Only if it is not aligned with your risk-return expectation, you can switch

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