Large Cap, Mid Cap, or Small Cap SIPs: Which is Better for Long-Term Growth

While the Systematic Investment Plan (SIP) has become the most popular option for investing in stock funds, investors are often confused about the ideal pattern for long-term growth.

Equity-oriented or growth mutual funds come in three varieties: large-cap, mid-cap, and small-cap. A recent report suggests that the small and mid-cap segments (SMIDs) could offer many opportunities for further potential growth. However, 10-year SIP data shows that mid-cap funds may be a better investment option for investors looking to invest for the long term.

“A large-cap mid-stock is generally less volatile than a small- and mid-cap mid-stock and offers portfolio stability. However, the small and mid-cap segments (SMIDs) can offer many opportunities for further growth potential in the long term,” said Whiteoak Capital MF in its “SIP Report”.

“The study finds that among the three market cap segments, the mid-cap segment is a good investment choice for investors looking to invest via the SIP route for the long term,” he added.

An analysis of the 10-year returns of the three indices tracked by the large-cap, mid-cap, and small-cap funds shows that the index tracked by the mid-cap systems produced higher minimum and maximum returns.

Nifty Midcap 150 TRI – Most mid-cap funds track this index. Over 10 years, this index has shown a maximum SIP return of 21.4% and a minimum SIP return of 6%. The average SIP performance of the plans that follow this index is 16.4%, while the average SIP performance is 16.5%.

Nifty 100 TRI – Most large-cap funds track this index. Over 10 years, this index has shown a maximum SIP return of 16.3% and a minimum SIP return of 4.3%. The average SIP performance of the plans that follow this index is 12.4%, while the average SIP performance is 12.5%.

Nifty Smallcap 250 TRI – Most small-cap funds track this index. Over 10 years, this index has delivered a maximum SIP return of 20% and a minimum return of -0.4%. The average SIP performance of the plans that follow this index is 13.4%, while the average SIP performance is 14.2%.