Small and midcap funds are other options if one wants to invest over a larger time frame preferably over five years.
Coming to the third option-- small and midcap funds. Those holding these funds over the past two to three years will be a happy lot.
Small- and midcap funds typically outperform in an upward trending market owing to the marginal incremental risk they take.
The best approach is to take an equal exposure in large-cap and midcap funds. "Large caps give stability to the portfolio and mid-caps provide extra returns in the long term," adds Nath.
2014 was the year of political fairy tales in Asia, led by India's spectacular bull market (most midcap funds
up 100 per cent) as $14 billion in offshore funds flooded Dalal Street equities on BJP/Modi euphoria.
Large cap funds choices could include ICICI Pru Focussed Bluechip and DSP BR Top 100 and Midcap Funds
like HDFC Midcap Opportunity or IDFC Premier Equity."
"By some people's measures, midcap funds
have outperformed all other categories of mutual funds over the last 15 years.
On the contrary, a large size can pose challenges for small- and midcap funds
in the form of marketimpact cost, the opportunity cost of having to spread out trades over longer periods and liquidity management," says Mehta of Morningstar.
It's pertinent to note that midcap funds
have not fared as well as large-caps over the longer term.
Midcap funds emphasize midcap growth stocks where sales and earnings are expected to accelerate rapidly--recent holdings include lesser known, established firms such as Med-Immune Inc.
Midcap funds bode well for individual investors looking to add more than growth potential to their portfolios.
The Strong Enterprise Fund's mix of large-, small- and midcap growth stocks resulted in a 55.8% total return as of August 31, landing it in fifth place for all midcap funds
. That easily beat the 7.18% return of all midcap funds
for the same period, according to Morningstar Inc., a mutual fund research firm in Chicago.