Large Cap ETF v/s Mid Cap ETF: Historical Performance Check

We've been giving a lot of advice about investing in ETF or Exchange Traded Funds. Here is an Example of Nifty based ETF. Some readers have also asked questions about whether they should go for Large Cap based ETF like the Nifty or Sensex based ETF or should they go for the Mid cap based ETF. Then there are some more investors who may look for much larger diversification, but with the benefits of ETF, so how has that performed?

In this article, we will look at the historical performance of the large cap ETF, mid cap ETF and much more diversified ETF from Benchmark ETF funds. The data provided is taken from the PDF that Benchmark funds have provided and the methodology is that used by Benchmark ETFs while making the calculations. The purpose of this article is NOT to advertise for Benchmark ETF, but to draw a comparison between Large Cap, Mid cap and diversified performance. Since the ETF's reflect the performance of the underlying index, their performance also give a very good analysis of whether you should go for large caps or mid caps or diversified funds. All data taken is as of February 27, 2009.

So here is the Historical Performance of Nifty Bees, the ETF based on Nifty 50 or the top 50 stocks of NSE as per market capitalization.

Returns for less than 1 year are absolute and more than one year are compounded annualized.
As we can observe in the data presented above by the Benchmark ETF, over a 5 year horizon NiftyBees ETF claims to provide a 10.67% annualized compounded returns.

Now, have a look at the Historical Performance of JuniorBees or the top 51 to 100 stocks of NSE as per the market capitalization.

Seeing the 5 year horizon, the annualized compunded returns from JuniorBees has been a mere 4.09 percent. Hence, over the long period, the Large Cap returns have outperformed the mid cap returns.

Related: SBI GETS-SBI Gold ETF NFO Review: SBI Gold Exchange Traded Scheme & Gold ETF: Historical Performance of Gold ETF & Gold ETF India

To cross-check, let's have a look at the data provided for the underlying index i.e. the Nifty 50 returns and the Nifty Junior Returns. If you compare the 5 year annualized compounded returns of the underlying benchmark index, you will see that the Nifty junior has provided a return of just 3.63% while Nifty 50 has provided a return of 8.94 percent.

Now this should be a sufficient sign for people who firmly believe that only Mid caps are the real winners and they may outperform the large caps. Well, that's not the case as you can see above.