Large Cap vs Mid Cap vs Small Cap: The 70-20-10 Portfolio Asset Allocation Rule
While small-cap funds deliver headline-grabbing rallies in bull markets, they also crash 40% to 60% during bear market corrections. A disciplined asset allocation protects your mental peace and portfolio solvency.
The 70-20-10 Equity Framework for Indian Investors
70% Large Cap / Flexi Cap: The foundation of your portfolio (NIFTY 50 and top 100 blue chips), providing steady 11% to 13% CAGR with manageable downside volatility.
20% Mid Cap: High-growth companies ranking 101 to 250 by market capitalization, offering 14% to 16% CAGR potential.
10% Small Cap: Companies ranking 251 and below with explosive growth potential but high failure rates.
Key Practical Takeaways:
Risk & Return Profile Across Market Capitalization Buckets
| Category | SEBI Universe Rank | 10-Year Rolling CAGR | Max Bear Market Drawdown |
|---|---|---|---|
| Large Cap Funds | Top 100 Companies | 12.0% – 13.5% | -25% to -35% |
| Mid Cap Funds | 101st to 250th | 14.0% – 16.5% | -35% to -45% |
| Small Cap Funds | 251st and beyond | 15.0% – 18.5% | -50% to -65% |
Common Questions on This Topic
What is SEBI's definition of Large, Mid, and Small Cap?
SEBI mandates: Top 100 companies by full market capitalization are Large Cap, 101 to 250 are Mid Cap, and 251 onwards are Small Cap.
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