I am 75 years old and have some investment in equity mutual funds. What would be the ideal ratio between large, mid, and small-cap funds?
- N Krishnamurthy
There isn't a thumb rule. Most people seek my guidance, thinking that there is a rule that I will explain and always work. But there is no such rule for many of the things which people ask for. For example, if Mr Krishnamurthy is an experienced investor and has been investing in the market for the last ten years, substantial investment in small caps would also be nice. On the other hand, if he is not experienced or is a person who gets nervous easily, or gets disappointed with a 20-30 per cent decline, he should stay away from mid and small caps. So the right allocation is entirely a matter of his comfort level. It will come only with your experience.
More theoretically speaking, the complexion of the market is such that large caps account for about 75 per cent of the market's value. Around 15-16 per cent is in mid caps, and the rest is in small caps. So one may consider following a similar allocation if one wants to do it on his own, otherwise, opt for the flexi-cap fund.