We discuss what investors should appreciate before selecting an index fund tracking the Nifty LargeMidcap 250 Index Fund. At the time of writing, five fund houses – Edelweiss, HDFC, ICIC Pru, Mirae Asset and Zerodha offer index funds tracking this index. See our earlier review: Zerodha Nifty LargeMidcap 250 Index Fund Review.
The Nifty LargeMidcap 250 Index is 50% of Nifty 100 + 50% of Nifty Midcap 150. This covers nearly 85% of all the traded equity stocks at NSE. This makes it distinctly different from a pure market-cap-weighted index like the Nifty 500. See: Nifty 50 or Nifty 500, which index fund should I choose?
In the LargeMidcap 250 index, the aggregate weight of large and mid cap stocks is capped at 50% each (quarterly reset). Within each segment, the stocks are weighted by free-float market capitalisation.
So, this certainly increases the risk, but the reward is neither proportional nor guaranteed. When the mid caps soar, this fund would look like a great investment; when they don’t, it would seem a terrible place to be in. We shall refer to the index as the “250” below.
10-year rolling return of Nifty 50 vs Nifty Next 50 vs Nifty LargeMidcap 250 TRI
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Want to create a complete financial plan? Learn goal-based investing? Exclusive access to our DIY tools? Increase your income with your skills? Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Recently, the LargeMidcap 250 index has had a return spread close to that of the Nifty Next 50. If it continues, it could mean holding a 250 index fund could be just as frustrating as holding a next 50 index fund (as many members of our community can attest).
There is a reasonable chance of outperforming the Nifty 50. Still, like all other funds, the margin and frequency of outperformance vary from time to time, depending on the performance of the mid-cap segment.
10-year rolling return of Nifty 500 vs Nifty Next 50 vs Nifty LargeMidcap 250 TRI
If we replace the Nifty 50 with the Nifty 500 in the comparison, the margin of the periodic outperformance is narrower.
10-year rolling standard deviation of Nifty 500 TRI vs Nifty 50 TRI vs Nifty Next 50 TRI vs Nifty LargeMidcap 250 TRI
The rolling standard deviation (volatility) shows there is not much difference between the Nifty 500 and the Nifty 250 indices.
Drawdown of Nifty 500 TRI vs Nifty LargeMidcap 250 TRI
This is a measure of how much an index falls from a peak and how long it stays “underwater”. The Nifty 500 is a bit less risky than the 250 index.
Drawdown of Nifty Next 50 TRI vs Nifty LargeMidcap 250 TRI
The Nifty Next 50 is riskier to hold than the 250 index.
Our recommendations
The main problem with the “250” is the high exposure to mid cap stocks. This can be extremely frustrating to hold when the mid caps don’t do well for an extended period. I know many young investors are eager to claim without experience that “they have the risk appetite” to hold such an index, but from what I’ve seen, much of that usually is ‘talk’. So we recommend the following.
- If you can conquer FOMO and can be happy with only large cap exposure, stick to the Nifty 50.
- If you cannot conquer FOMO and want exposure from “other segments”, buy the Nifty 500.
A Nifty LargeMidcap 250 Index Fund is certainly not a terrible idea, but investors must appreciate that the high exposure to midcap stocks can be a double-edged sword.
Use our Robo-advisory Tool to create a complete financial plan! ⇐More than 3,000 investors and advisors use this! Use the discount code: robo25 for a 20% discount.Plan your retirement (early, normal, before, and after), as well as non-recurring financial goals (such as child education) and recurring financial goals (like holidays and appliance purchases). The tool would help anyone aged 18 to 80 plan for their retirement, six other non-recurring financial goals, and four other recurring financial goals with a detailed cash flow summary.
🔥You can also avail massive discounts on our courses and the freefincal investor circle! 🔥& join our community of 8000+ users!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
You can follow our articles on Google News
We have more than 1000 videos on YouTube!
Join our WhatsApp Channel
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over 13 years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free aum independent investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,500 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Increase your income by getting people to pay for your skills! ⇐ More than 800 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: To get in touch, use this contact form. (Sponsored posts or paid collaborations will not be entertained.)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)