What should investors do now that these types of mutual funds have performed well over the last six months?

 What should investors do now that these types of mutual funds have performed well over the last six months?

Retail and institutional investors favored small cap mutual funds, resulting in a total inflow of $22,048 crore in the first six months. Based on market capitalization, the AMFI (Association of Mutual Funds in India) statistics indicates that this is the highest mutual fund category.

The mid-cap funds got around 10,871 crore in half a year after these (small caps). It's interesting to note that throughout this time, 5,697 crore in big cap funds were redeemed. Over 4,100 crore were invested in index mutual funds during the first six months of current fiscal year, which was a significant influx.

Let's examine these figures closely and solve the puzzle they represent.

An increase in small-cap funds

Retail investors are encouraged to participate in small cap funds because of their unquestionable recent run-up. Wealth experts advise clients to avoid making further investments in these programs.

"Small caps have seen quite a run up as money has been pursuing them. At the highest levels, investors are now entering. This is typical of the behavior of regular investors, who avoid making purchases when prices are low. This is really a reason for concern since, instead of investing at the top level, investors would be better to buy at a lower price level and sell it at a higher one. According to Ravi Saraogi, co-founder of Samasthiti Advisors, "we have recommended our customers to avoid the incremental investment in small and medium caps, at least for the time being.

At the same time, several big cap funds are being redeemed, especially the active mutual funds since they often fall short of the benchmark, as a recent study has also shown. In addition, index mutual funds, which have regularly provided positive returns, are seeing an increase in intake.

Do you still need to make small- and mid-cap investments?

Although some financial gurus advise against investing in tiny caps, others believe the idea is still worth considering, especially if investors have a long-term time horizon of seven to ten years.

"If a person has a long-term investment horizon of seven to ten years, they can consider adopting a 30 to 40 percent exposure to small- and mid-cap funds. SIPs are the most effective method to go about it. You may get exposure throughout economic cycles and value ranges in this manner, according to Amol Joshi, the founder of Plan Rupee Investment Service.

Balanced advantage fund inflow

Balanced benefit mutual funds saw a positive inflow over the previous three months, raising their total to $3,487 crore, which is another pattern that has emerged.

According to Amol Joshi, who is discussing balancing advantage funds, one might think about investing in this category regardless of the market's stage or cycle.

"Even during a frenzy, there is a sector that uses these funds to get balanced exposure to hazardous assets. They are suggested for investors who have a moderate appetite for risk but not a high one. It is an all-year-round item. For those who desire a reasonable risk and return, it is preferable, he continues.