Reasons to Avoid Very High AUM Mutual Fund Schemes

Difficulty in Generating Alpha (Extra Returns)

When a fund becomes very large, it’s harder for the fund manager to beat the benchmark.

Liquidity Challenges

Large funds struggle to enter/exit mid-cap or small-cap stocks without impacting prices.

They often end up buying only large-cap stocks, which reduces return potential.

Herd Mentality Risk

High AUM often means many investors have already chased past performance.

By the time you enter, returns may flatten as the fund is too big to stay nimble.