Mutual Fund SIP: How much to invest in large, mid and small caps? Portfolio allocation EXPLAINED by expert

Mutual Fund SIP: Confused about how much to invest in large, mid, and small cap funds through SIPs? With market volatility and changing cycles, choosing the right portfolio mix can make all the difference to long-term returns. Here, the expert breaks down the ideal allocation across large, mid, and small caps, explains which funds suit different risk profiles, and shares practical tips for building a balanced, goal-oriented SIP portfolio. Here's what every investor needs to know before doing their next SIP move.

This article covers the key queries raised on the show Bano Apna Finance Minister on ET Now Swadesh. We highlight the expert’s recommendations for different types of portfolios, helping investors assess whether their current holdings are aligned with their goals or need a review. Here’s a brief guide on how to allocate investments across large, mid, and small caps, and what you should check in your own portfolio.

An investor, aged 46, has built a diversified portfolio that includes Nifty 50 and Nifty Next 50 index funds, Parag Parikh Flexi Cap Fund, HDFC Small Cap Fund, HDFC Flexi Cap Fund, and the ICICI Nifty Midcap 150 Index Fund. His current corpus stands at Rs 42 lakh. He plans to invest an additional Rs 20 lakh this year and has set a retirement goal of Rs 2 crore, which he aims to achieve over the next 14 years.

According to the expert, the investor appears to be disciplined with a cost-efficient portfolio that has a strong index fund core. To achieve their retirement goal, an additional monthly investment of around Rs 34,000 is recommended. The expert suggests replacing the midcap index fund with an actively managed midcap fund, such as Motilal Oswal or Invesco, as active management can potentially deliver better returns in the higher-risk midcap segment.

Another investor, Anand, wants to invest Rs 5 lakh in equity funds for three years and is considering Power or IT sector funds.

According to the expert, three years is too short for equity mutual funds, and sectoral or thematic funds carry high risk over short durations. If the investor wants to invest in mutual funds, they should focus on broad-based options such as Nifty 50, Large & Midcap, or Flexi Cap funds. Sectoral funds are not suitable for first-time or short-term investors.

For the Rs 5 lakh investment, it is advisable to stagger the amount over 3-5 months and diversify across at least three different funds. This approach helps reduce risk and benefits from cost averaging.

Another investor, Chandrashekhar, invests Rs 1.45 lakh monthly through SIPs, with Rs 10,000 each allocated to gold and silver ETFs.

The diversification approach is good, but metals should not exceed 20 per cent of the portfolio. While metals may seem attractive now, equities tend to deliver better long-term returns. Consistent investing and proper asset allocation are more important than chasing market trends, according to the expert.

Another investor, Harsh, aims to accumulate Rs 1 crore in 15 years. His current SIP portfolio includes Parag Parikh Flexi Cap, Motilal Oswal Midcap, Tata Small Cap, and HDFC Flexi Cap. He plans to add an additional Rs 20,000 to his monthly SIP.

According to the expert, the investor portfolio is well-structured but lacks large cap exposure. The investor should add a large cap fund like Nifty 50 or ICICI Large Cap. Mid and small caps may underperform temporarily, but continuing SIPs helps with cost averaging. No redemption is needed at this stage.

(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)