The Missing Middle of the Portfolio
Why a 70% mutual-fund core and a 30% direct-equity sleeve can become a search for India’s next generation of market leaders A 70:30 allocation between equity mutual funds and direct stocks can be more than a compromise between passive diversification and active stock-picking. Properly constructed, it creates two complementary portfolios: the mutual-fund component owns much of corporate India that is already discovered, institutionalised and widely researched; the direct component searches for businesses that are still becoming visible. This distinction becomes particularly important when the direct sleeve moves beyond the familiar large and midcap universe and concentrates on companies roughly in the next 250–550/600 by market capitalisation. But this is not a licence to buy everything small. Mutual funds themselves increasingly penetrate the smallcap universe, valuations can become euphoric, liquidity can disappear precisely when needed, and the best-looking growth story can still b...