Large-cap mutual fund or Nifty 50 index? Expert weighs in on where to invest — and if SIP is better

Large-cap mutual funds and Nifty 50 index funds both offer ways to gain large-cap exposure. But should investors choose one or hold both? An expert explains how passive and active allocations can fit into a portfolio and what investors should consider. 

Large-cap mutual funds and Nifty 50 index funds are two ways investors can get exposure to large-cap stocks in their portfolio.

Nifty 50 index funds replicate the 50 stocks in the index and follow a passive strategy, while active large-cap funds must invest at least 80% of their assets in large-cap stocks and generally pick stocks from the top 100 companies by market capitalisation.

Large-cap funds can hold a varying number of stocks, with some holding more than 50 stocks and others fewer, depending on the fund manager’s strategy.

But should investors choose both or keep only one, given that both offer large-cap exposure? Here’s what an expert has to say.

Should investors hold Nifty 50 index fund and large-cap funds?

Harsh Vardhan Dawar, ACA, CFA, FRM, Founder - Wealth Cafe, said investors should tag all investments in their portfolio as either passive or active, and also by market-cap category — large, mid or small cap.

He suggested that a typical 30-year-old growth investor may have:

Nifty 50 index fund or large-cap: What should new investors consider?