Crecer Funds Allocation
Protector : Less risk less profit (protection is more and risk very low @here).
Assured : Where we have assurance of the return those returns are good not high.
Growth : Put your money for the increase (risk and profit same).
Maximizer : High risk high profit (maximum profit we are putting on big cap for maximizing profit).
|FUND PLANS||Percentage of Trading done in BIG CAP||Percentage of Trading done in MID CAP||Percentage of Trading done in SMALL CAP|
When understanding how to allocate funds for investing in equities, it is important to understand both your expectation of return (a function of your financial goals) and also your risk appetite. Once you are clear on these, it will be a lot easier for you to allocate money between the various categories of stocks.
In the first article, we understood the basic fact that investing is essential for achieving your financial goals. Now, let us step forward and understand the three categories one has to pick from for one's portfolio.
Understanding 'Market capitalisation'
There are three main classifications when it comes to stocks
- Big Cap stocks
- Mid Cap stocks
- Small Cap stocks
Big cap stocks
These are stocks of usually big and well-established companies that have a strong market presence and are generally considered as safe investments. One important fact about big caps is that information regarding these companies is readily available in newspapers and magazines. Most of the big cap companies have good disclosures and therefore there is no dearth of information for an investor looking into them.
Big companies such as Infosys, TCS, and Wipro are classified as big cap stocks. These companies have been around in the industry long enough and have firmly established themselves as leading players. Their stocks are publicly traded and have big market capitalizations.
Mid cap stocks
Mid caps lie between big cap stocks and small cap stocks. Mid cap stocks are those that generally have a market capitalization within the range of Rs 50 bn and Rs 200 bn.These represent mid-sized companies that are relatively more risky than big 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 big cap stocks that can bring you moderate (yet safer) returns during this timeframe.
Small cap stocks
Small cap companies have smaller revenue and client bases, and usually include the start-ups or companies in the early stage of development. Small cap stocks are potentially big gainers as they are yet to be discovered within the sector and can show growth potential in big numbers once unfurled in the market. However, as these enterprises are small ventures, these should be researched properly. This is considering that a lot of small companies do not have the financial strength to survive bad times and some of them might be mismanaged businesses run by greedy promoters. Hence it is essential, especially in the case of small caps investments that one does a thorough research regarding the promoters' credentials, management strength and track record, and long and short term growth plans of the company before investing.
Small caps are often stated to be a platform to make big returns in a short span of time. However, we would state that small caps can prove to be a very wise 'long term' investments especially if the chosen companies are good businesses and are well-managed.
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