Publication details: Money Manager – CNBC Bajar – 11-01-2016
Responses, opinion and view from Kartik Jhaveri.
Question sent by Sidharth Prajapati:-
My age is 23 and I am working in HCL technologies. I am new to investing and have the following queries :-
- What is mid cap and large cap ? Which one is better for investment ?
- I want a high return on my investment but with average risk. Kindly suggest an ideal investment plan.
- What should be the time duration to hold investments ?
- I have an ICICI demat account. Can I invest in Reliance through that account ?
Advice given:
- Mid cap and large cap :-
- Cap is short for capitalization which is a measure by which we can classify a company’s size.
- Large cap means company with market capitalization greater than $8 billion.
- These are stocks of usually large and well-established companies that have a strong market presence and are generally considered as safe investments. One important fact about large caps is that information regarding these companies is readily available in newspapers and magazines. Most of the large cap companies have good disclosures and therefore there is no dearth of information for an investor looking into them.
- Mid cap means company with market capitalization between $2 billion and $7 billion.
- These represent mid-sized companies that are relatively more risky than large cap as investment options yet, they are not considered as risky as small cap companies. They rank between the two extremes on all the important parameters like size, revenues, employee and client base.
- When one invests in mid caps for the long term, he may be investing in companies that could become tomorrow’s runaway success stories. Generally speaking, mid cap stocks as an investment can bring you higher returns in 3 to 5 years as opposed to their big brother large cap stocks that can bring you moderate (yet safer) returns during this timeframe.
- If your investment horizon is about 8-15 years, and if you can stomach a comparatively higher risk, then you can opt ย ย for equity mutual funds. Even within the ambit of equity mutual funds, you can diversify your risk by spreading your investments among diversified, large cap, mid cap and sectoral funds.
- However, if you are a conservative investor, then you can opt for debt funds. These have an investment horizon of about 1-3 years.
- You can buy any listed shares from your ICICI Demat account. However, I will not recommend buying stocks directly, if you’re doing it for the first time. You could look to invest in a good diversified equity mutual fund wherein a professional fund manager will invest on your behalf and chances are you will make much higher returns.
