Mutual fund portfolio: How conservative, moderate and aggressive investors can allocate in current scenario

Large- and small-cap mutual funds are seeing different investor interest, raising questions about how you should allocate across equity and other asset classes. A September report outlines how conservative, moderate, and aggressive investors could structure their portfolios.

With investors showing growing interest in small- and mid-cap mutual funds, reflected in higher inflows, while large-cap funds have seen relatively less traction, should you rethink how you allocate your portfolio in the current market scenario?

DSP Mutual Fund’s Navigator Report for September 2026 suggests that large-cap funds are becoming more attractive as valuations moderate in this segment, while investors should remain cautious with small- and mid-caps.

The report suggests allocating around 30% to equity funds for investors with a conservative-risk profile, 60% for those with a moderate-risk profile, and 70% for investors with an aggressive-risk profile.

What does the report reveal about large- and mid-cap funds?

The report sees improving risk-reward in large-cap funds. “Large caps are becoming attractive again. The Nifty has remained range-bound while earnings have continued to grow. Trailing P/E is now close to 19.5x, between long-term average and fair value. Q2FY27 earnings could take trailing valuations below 19x,” it stated.

However, DSP remains cautious about the small- and mid-cap funds. “SMIDs still lack a margin of safety. Activity and valuations across the broader small- and mid-cap universe remain buoyant. Even 20%+ earnings growth does not comfortably justify broad trailing valuations of 30–40x.”

While the DSP recommends staggering investments in small- and mid-cap funds and avoiding large lump-sum allocations, it sees the current valuation zone as reasonable for adding to large-cap funds, including through lump-sum investments.