Most experts say that if you do not understand stocks, then you should invest in mutual funds. But there are many options available in mutual funds like large cap, small cap, mid cap, flexi cap, and value funds. In such a situation, new investors do not understand where they should invest. Investment should always be done keeping in mind your needs and goals. Understand the difference between them here and then decide which type of fund will be most beneficial for you.

Large Cap
The large-cap category includes those top 100 companies, whose market cap is the highest in the market. If you invest in a large cap, it means that you are investing in the shares of the top 100 companies according to the market cap. These are also called "blue-chip stocks". Being large-cap, these companies have a stronghold in the market. Market fluctuations have less impact on them as compared to mid-cap and small-cap. There is not much instability in them during a market correction, their growth is balanced. Most experts consider investing in them safe. Investors who do not want to take much risk can invest in them.

Mid Cap
The companies that come in the mid-cap segment are ranked from 101st to 250th based on market cap. This means that according to the market cap, these companies are neither at the top nor at the bottom of the market. Mid-cap companies have the strength to become large-sized companies. At the same time, there is an opportunity to get higher returns from investment. Investment made in them is slightly more risky than large cap, but it is less risky than small cap. That is why mid-cap is also considered an investment that balances risk and return.

Small Cap
The companies coming in small cap come in 251st rank or after that in terms of market cap. These companies have the potential to become mid-cap in the future. Small-cap companies are high-risk and high-return stock investments. Their growth is very fast, but if things do not go well, then one may have to suffer a big loss. Being small companies, there is more instability in them and the fluctuations in the market also affect them the most. If you can take risks to make more money, then you can invest in it.

Flexi Cap

Flexi cap fund is an open-ended fund, in which the fund manager is not bound to how much he has to invest in which fund category. In this, the fund manager can invest any percentage of the investor's money in any category, small, mid, or large cap, as per the need. Through this, you get a chance to diversify your portfolio. These funds are known to reduce risk and give better returns. But you should have an understanding of the market to know how much money should be invested in which fund and when. If not, then you should invest in it only after taking advice from an expert.

Value Fund
Value funds are those mutual funds that invest in stocks whose current valuation is below their fair value. The current price of such stocks remains low due to market volatility or any negative sentiment. However they are likely to give good returns to investors by achieving their correct valuation in the future. Value funds are suitable for those investors who want balanced and stable returns in the long term.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.