What are Mid Cap Mutual Funds

Mid-cap mutual funds primarily invest in companies with medium market capitalizations, striking a balance between growth potential and risk. They offer investors the opportunity to benefit from the agility and expansion prospects of mid-sized companies, while generally experiencing lower volatility compared to small-cap funds and higher growth potential than large-cap funds.
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What is Mid Cap Funds
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3 mins read
9-April-2025

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.Mid-cap funds are ideal for investors who seek high-growth potential while managing moderate risks. If you’re exploring mid-cap investment opportunities, you can compare mutual fund options now and find the one that aligns with your goals

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
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Frequently asked questions

How long should I stay invested in mid-cap fund?

It is advisable to stay invested for at least 5 years or more to benefit from this fund category.

What risk do mid-cap funds carry?

Mid-cap funds are subject to market risks like all mutual funds. However, they offer diversification to investors who seek long-term growth in a diversified portfolio.

Who should invest in mid cap mutual funds?

Mid-cap funds are suitable for investors with a moderate level of risk-tolerance who seek long-term growth in a diversified portfolio.

How long should I stay invested in mid cap mutual funds?

It is advisable to stay invested for at least 5 years or more to benefit from this fund category.

Where do mid cap mutual funds invest?

Mid-cap mutual funds invest in the stock of mid-sized companies, which are ranked from 101 onwards till 250 based on their market capitalization.

Are mid cap mutual funds high risk?

Mid-cap mutual funds are considered to carry moderate risk as they invest in mid-sized companies that have the potential for growth but may underperform in the short to medium term .

What kind of returns can I earn from Mid Cap?

It is generally advisable to stay invested for at least 5 years or more to benefit from this fund category.

Which is better mid-cap or small-cap?

The suitability of mid-cap or small-cap funds depends on individual investor goals and risk tolerance. Mid-cap funds offer moderate risk with growth potential, while small-cap funds carry higher risk but may yield greater returns.

Which mid-cap fund is best in India?

Determining the best mid-cap fund depends on factors such as investment goals, risk tolerance, and fund performance. Conduct thorough research, consider past performance, expense ratios, and fund manager expertise to find the most suitable mid-cap fund.

How do I choose a mid-cap fund?

To select a mid-cap fund, assess your investment goals, risk tolerance, and time horizon. Research fund performance, expense ratios, investment philosophy, and fund manager track record. Ensure alignment with your investment objectives before making a decision.

What are the rules for mid-cap funds?

Mid-cap funds typically invest in companies with market capitalisation between Rs. 500 Crore to Rs. 10,000 Crore. Investors should have a medium to long-term investment horizon and be prepared for higher volatility compared to large-cap funds.

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The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

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