Mid-cap funds are a type of mutual fund that invests in mid-sized companies. These companies are in the middle of the market capitalisation spectrum with a market capitalisation between Rs. 500 Crore to Rs. 10,000 Crore. According to the norms, companies that are ranked from 101 to 250 based on their market capitalisation, are categorised as mid-cap companies. If your risk appetite is good, then mid-cap funds are made for you.
Mid-cap companies are generally considered to be higher-risk, higher-growth companies compared to large-cap companies. You will also require an investing horizon of 8-10 years. Keep in mind that the mid-cap market offers several prospects for investment and wealth growth. As a result, it is critical to select a program that focuses heavily on market research and identifying suitable investment prospects. Also, before investing in mid-cap funds, examine your financial goals as well as your risk tolerance and investment horizon. In this article, you will learn about mid-cap funds: ideal for moderate risk-takers seeking growth opportunities. Dive into their unique traits, target audience, benefits, and effortless investment process on Bajaj Finserv platform.
What are mid-cap funds?
Mid-cap funds are a type of mutual fund that primarily invests in the stocks of mid-sized companies. These companies fall between large-cap and small-cap companies in terms of market capitalisation. Mid-cap funds offer investors exposure to a diverse range of mid-sized businesses with growth potential. They typically exhibit higher volatility compared to large-cap funds due to the inherent risk associated with mid-sized companies. However, they also present the opportunity for significant capital appreciation over the long term. Mid-cap funds are suitable for investors seeking growth opportunities while accepting a moderate level of risk in their investment portfolio.
How does a mid-cap mutual funds work?
Mid-cap mutual funds entail greater risk compared to large-cap funds. Therefore, these schemes are suitable for investors with a higher risk tolerance and a time horizon of approximately 8-10 years.
It is crucial to recognise that the mid-cap segment presents ample investment prospects and avenues for wealth accumulation. Hence, selecting a scheme that prioritises thorough market research and identifies promising investment opportunities is essential. If your risk tolerance is low, it is advisable to reassess investing in such funds. Additionally, ensure thorough consideration of your financial objectives, risk appetite, and investment horizon before venturing into mid-cap funds.
What are the features of mid-cap funds?
Consider these key aspects before committing to Mid Cap funds:
- Long-term perspective:
For optimal returns, it is essential to stay invested in equities for an extended period. Mid Cap companies, often in their growth phase, possess the potential to evolve into tomorrow's large-cap entities. Therefore, a horizon of 8-10 years is advisable to fully capitalise on mid-cap investments. - Expense ratio consideration:
Every fund incurs administrative and management expenses reflected in its expense ratio, a fraction of the total assets. SEBI has capped the upper limit of this ratio at 2.50%. Opting for a fund with a lower expense ratio translates to higher returns on investment. - Fund management evaluation:
The fund manager plays a pivotal role in making investment decisions, impacting portfolio performance. It's crucial to assess the track record of the fund manager and scrutinise the fund house's overall performance and resilience to market volatility over time. - Suitability assessment:
Mid-cap equity funds offer compounding benefits, but optimal results are achieved over time, making them ideal for young investors with ample time before retirement. Age should be a determining factor when selecting schemes, ensuring alignment with investment goals and timelines.
