Get the leading large cap funds over here.

Mid cap funds
These funds invest in companies that have a lower market capitalisation than the large caps. For instance, Sundaram Mutual Fund defines mid caps as stocks with a market capitalisation of less than Rs 1800 crores (Rs 18 billion). However, this level varies from fund house to fund house.

As with large caps, BSE (BSE Mid Cap 200) and S&P CNX (S&P CNX Mid Cap 200) have designed their own indices for mid cap stocks. Many mid cap funds benchmark their performance against these indices, which also serves as a reliable investment universe for their own funds.

Investments in mid caps are a riskier proposition as compared to investments in large cap funds. There are several reasons for the same. One, the mid cap companies are usually under-researched. Two, such companies tend to be illiquid as they have a smaller market capitalisation. This in turn leads to above-average volatility. Fund managers often find it difficult to exit these stocks in a falling market or enter when interest in the stock is building up.

The upside -- the fund can generate a superior return as mid cap stocks have the potential to give a higher return vis-�-vis large cap companies. This is mainly because many of these companies are in a growth phase as opposed to large caps that have attained relative stability. In fact, a mid cap stock could well graduate to a large cap over the years giving the investor a significant return on his investment. Franklin India Prima Fund, Magnum Global Fund, Sundaram Select Mid Cap fund are some examples of mid cap funds.

Small cap funds
As the name suggests, small cap funds invest in companies with a smaller market capitalisation. In its recently concluded IPO (Sundaram SMILE) -- Sundaram Mutual Fund defined small caps as stocks with a market capitalisation of less than Rs 200 crore (Rs 2 billion). Investing in small cap funds is fraught with considerable risk.

To begin with, small cap companies in most cases are just evolving. Again, as with mid caps, information on small caps is not easily available so these companies are under-researched or maybe not researched at all. So we are contending with a relatively unknown entity here. However, the risk-return trade-off is much higher vis-�-vis large caps and mid caps.

Currently this is a niche segment as there is no fund investing purely in small cap stocks. Sundaram SMILE is probably the first small cap fund of its kind.

Multi/Flexi-cap fundsJust about every second mutual fund IPO these days is a multi/flexi cap fund. The fund manager has the mandate to shift across market capitalisations depending on the growth opportunity. This is generally dictated by the 'flavour of the day' i.e. which sector is driving growth at a given time or which market segment (market capitalisation) is witnessing the latest rally.

But generally, there's a ceiling on how far the fund manager can go in a particular market segment or sector. This helps in keeping the portfolio relatively diversified and mitigate risks. In terms of risk-return trade-off, these funds are positioned between large caps and mid caps.

Some multi cap funds include -- DSP ML Opportunities, Tata Equity Opportunities, Principal Resurgent India Fund.

To put things in perspective, none of the abovementioned funds can be classified as good or bad investment options. It depends on the risk appetite of the investor as well as how well-informed he is about a particular sector, market segment and companies within that segment. Therefore, it makes sense for an investor to diversify his mutual fund portfolio and include various types of funds without deviating from one's risk profile.