Over a period of 25 years, would the returns from a multicap fund similar to the returns from a small or midcap fund?
No. I expect that the returns from a smallcap fund would be substantially higher in India. Over a time period of 25 years, smallcap would rewards you the most. Returns from midcap would be little lower than small cap. And the returns from multicap would be even lower than midcaps.
Multicaps would have a certain part in midcap, smallcap and even largecap. Multicaps tend to get large with time. And as they get bigger, investing in smallcap stocks get challenging over time.
Considering the Indian economy, and the way we are evolving and changing, I think rewards from finding small cap companies which turn big, would be highest. It would be substantially higher in comparison to the rewards of finding a good big company, which get bigger, but not at the same rate. The risk-reward ratio with smallcaps is high.
Also, there could be disasters on the way of smallcaps, but even then, over a period of 25 years, I feel smallcaps would reward you the most, followed by midcaps and then multicaps.
This article was originally published on October 25, 2018.
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