An investor can invest in large, mid, and small cap mutual funds in the following three ways: active funds, index funds, and exchange-traded funds (ETFs). Active funds and index funds offer the systematic investment plan (SIP) route. In an active fund, the fund manager decides which stocks to buy and sell, the quantity, and the price. The fund manager aims to outperform the benchmark with active management.
In an index fund, the fund manager invests in all the benchmark index constituents as per their weightage in the index. Index funds have the benefits of low cost, simplicity, and benchmark returns (after accounting for expense ratio and tracking error).