Small cap mutual funds vs Nifty50 index fund

Where would you prefer to invest your money and why? Would love to know about different thinking patterns and outlook regarding this. Thanks in advance

Small cap funds have too much drawdown and liquidity risk. Just not worth it for me even when i was investing in equity. These things are not liquid and when people panic, liquidity can disappear => larger falls. That’s why they often have AUM limits.

Midcaps probably are better, not sure that’s what i remember but have not looked at data.

Compared to trading, none of them are particularly interesting.
We can ofc pledge them too. I ll probably only consider them on large once-a-decade crashes, or during periods when equity looks shit for say past 5 years and even then will only put say 20% of capital or so in steps. . Usually value stuff / small / mid caps can do very well in these times but ofc we can have more pain in short term.

Right now, it seems every one is feeling good about the market. There is no euphoria perhaps, so we have more space but these kind of fearless times can lead to tougher markets in future. Maybe, maybe not but anyway trading gives me freedom to not have to invest in stocks always.

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So where do you generally invest your trading profits?

All in debt funds, pledged for trading. yield is ok, real rates are positive now. At the least it cushions inflation impact on trading capital and trading income is close to real returns post inflation.

Some kind of mix of debt/equity and perhaps gold might be fine too i guess but for now i am keeping it simple. But that might certainly make more sense for capital that is not allocated to trading. I was invested for more than a decade and did ok overall inspite of making few mistakes.

But for trading capital, equity returns ( say 10-15% long term ) are too low vs outlier risk for me, the 40-60%+ DD that can happen. And not every time we will get quick bounce backs.

Anyway, maybe one day i will try to design systems for investing and then ill invest again.