Market Cap
Comparison

Standard allocation by risk profile: Conservative — 70% Large + 20% Mid + 10% Small. Moderate — 50% Large + 30% Mid + 20% Small. Aggressive — 40% Large + 30% Mid + 30% Small. Always start with large cap index fund as the core. Add mid and small cap only after you have 3+ years of large cap SIP experience. Rebalance annually back to target allocation.

Small cap premium exists because: (1) Higher business risk demands higher return. (2) Less analyst coverage = more mispricing opportunities = higher alpha. (3) Many small companies become mid/large cap over 10 years — early investors benefit from reclassification. (4) India's growing economy creates more new businesses in the small cap space. But remember: for every small cap multi-bagger, there are 5 that fail completely.

For large cap allocation: yes. SPIVA data shows ~65-70% of large cap active funds underperform Nifty 50 over 10 years after expenses. Index fund expense ratio (0.10-0.20% direct) vs active large cap (0.7-1.5% direct) — this 1% difference compounds massively. For mid and small cap, active management is more valuable because these markets are less efficient.

Flexi Cap: Fund manager allocates across any market cap with no restriction — typically overweight large cap. Multi Cap: SEBI mandates minimum 25% each in large, mid, and small cap — more balanced and volatile. Large & Mid Cap: Minimum 35% each in large and mid cap, no small cap mandate — good balance of stability and growth. All three are taxed as equity funds (LTCG 12.5%).