How much percentage should be allocated to small and mid caps in portfolio?

POSTED BY marshaln ON September 26, 2010 10:07 am COMMENTS (9)


How to decide the percentage of small and mid cap in portfolio?

9 replies on this article “How much percentage should be allocated to small and mid caps in portfolio?”

  1. sainath says:

    i have invested 65% in large cap, 25% mid cap and 5% small cap

  2. Manish Bansal says:

    I Think 30 % to Mid Cap Fund becos mid cap now a days plays a imp. role Also keep 10- 15 % in Small Cap.

  3. marshaln says:

    thanks @vipul for insight, appreciate it.

  4. vipul rastogi says:

    This allocation decision depends on a lot of factors like investor’s age, income, wealth , risk appetite , financial goals & needs and liquidity preference.However as u grow older u need to have a greater proportion of investment in large cap stocks/funds. Some points must be kept in mind – 1. In the beginning u must invest in large cap stocks / funds only. Mid and small cap must be avoided till 5-7 yrs or the point u have a sizeable corpus.2. Once u have a decent corpus , u can take risk by investing in mid and small cap stocks.The % again will depend on your age and risk appetite. It can be vary from 10-40% .The usual age bracket is 30-45 for this stage and the horizon should be long enough – 10-15 yrs so that u can have superior returns.Ur investment in to mid cap stocks / funds should not be dictated by bullish market situations. 3. After age 45 , u need to make a gradual tactical shift from mid and small cap stocks to large cap . The time horizon for this stage should be 10- 15 yrs ideally.It will help consolidate gains u have had in mid and large cap till now.

  5. marshaln says:

    i feel 20-30% is ok
    having said that i also feel direct exposure to small and mid caps will be too risky..

  6. marshaln & Jayaprakash

    Should’nt it be linked with how much a person is fine with risk and volatility ? I understand that in general 20-30% would work fine , great answer from Jayaprakash on that .

    However there can be people who are not atall confortable with equity also , so for them even large cap is too much , and on the other hand some people might want to allocate 60-75% in midcap which is on extreme side

    What do you guys thing ?


    1. JayaprakashReddy says:

      I completely agree with Manish. Yes, it has to be on risk appetite of the investor. Thanks for putting up that point.

  7. marshaln says:

    thanks @jayaprakash

  8. JayaprakashReddy says:

    As small and mid caps are mostly related to high risk and fluctuation category, I would suggest it should be below 30% of total equity allocation

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