Midcap/SmallCap funds are riskier than diversified funds. Midcap/SmallCap tend to out perform diversified funds during momentum phases, however, they can be very volatile in the short term. Thus the investment horizon for Midcap/SmallCap funds should be more than three years and allocation not more than large cap funds in the investment portfolio. Investors should also preferably opt for the systematic investment plan or the systematic transfer plan routes where the risks are reduced by cost averaging.
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