Investing in mid-cap mutual funds can be a smart choice! Most investors choose mid-cap funds to balance risks and growth possibilities in their portfolios. The mid-cap sector has a dynamic market landscape that presents several opportunities, as large returns can be made on companies growing so fast.
What are mid-cap funds?
Mid-cap mutual funds are equity-oriented mutual funds that invest mainly in mid-sized companies. Usually, those ranked between big and small firms based on their market capitalisation. Companies that are comparatively large in their sector but the capitalisation is mid-sized but have a good presence in the market and may grow further to become more profitable over time.
These funds typically allocate 65% of their investments to companies ranked between 101 and 250 based on market size. They have shown performance, offering returns and demonstrating significant growth potential.
Thus, mid-cap funds can help one strike a balance between stability and growth; this ensures that as an investor, you can get reasonable returns without taking too much or too little risk. As such, mid-cap funds can appeal to investors who want higher rewards but want to avoid taking high risks. Compared with large-cap companies, these types of investments often grow at faster rates yet possess some stability as well as market share, thus making them attractive choices for most investors who intend to invest for a long duration and want comparatively greater returns at moderate risk levels.
Top 5 best-performing mid-cap funds over the last 10 years:
Selecting the most appropriate mid-cap funds requires scrutiny of market tendencies, fund performance, and management expertise. This article will discuss the top 5 best mid-cap funds to invest in, revealing their key performance indicators, risk profiles, and what makes them different from other investments available.
Let’s explore five performing mid-cap funds and the reasons why investing in them is beneficial.
Scheme Name | Plan | Category Name | Crisil Rank | AuM (Cr) | 3Y | 5Y | 10Y |
Motilal Oswal Midcap Fund-Growth (Direct Plan) | Direct Plan | Mid Cap Fund | 5 | 12,627.68 | 39% | 35% | 23% |
Kotak Emerging Equity Fund-Growth (Direct Plan) | Direct Plan | Mid Cap Fund | 3 | 49,023.27 | 25% | 31% | 23% |
Edelweiss Mid Cap Fund-Growth (Direct Plan) | Direct Plan | Mid Cap Fund | 4 | 6,624.72 | 27% | 33% | 23% |
Quant Mid Cap Fund-Growth (Direct Plan) | Direct Plan | Mid Cap Fund | 3 | 8,747.40 | 33% | 40% | 22% |
Invesco India Mid Cap Fund-Growth (Direct Plan) | Direct Plan | Mid Cap Fund | 3 | 5,216.03 | 25% | 31% | 22% |
- Motilal Oswal Midcap Fund – Growth (Direct Plan) has a Fund Size ₹ 12627.68 Cr and an Expense Ratio of 0.61%. Its benchmark is the Nifty Midcap 150 TRI.
- Kotak Emerging Equity Fund-Growth (Direct Plan) has a Fund Size ₹ 49,023.27 Cr and an Expense Ratio of 0.36%. Its benchmark is the Nifty Midcap 150 TRI.
- Edelweiss Mid Cap Fund-Growth (Direct Plan) has a Fund Size ₹ 6,624.72 Cr and an Expense Ratio of 0.3%. Its benchmark is the Nifty Midcap 150 TRI.
- Quant Mid Cap Fund-Growth (Direct Plan) has a Fund Size ₹ 8,747.40 Cr and an Expense Ratio of 0.62%. Its benchmark is the Nifty Midcap 150 TRI.
- Invesco India Mid Cap Fund-Growth (Direct Plan) has a Fund Size ₹ 5,216.03 Cr and an Expense Ratio of 0.61%. Its benchmark is the BSE Midcap 150 TRI.
However, when you opt for mid-cap funds, you must consider multiple parameters, not past performance alone. Here are some of the reasons that you must consider while choosing mid-cap mutual funds for your investment portfolio.
Reasons to Consider MidCap Funds:
The top 6 reasons to have some mid-cap exposure in your investment portfolio are:
- Growth Potential:
Mid-cap companies are known for their growth, presenting opportunities for capital appreciation. Thus, this is the most obvious reason for investing in mid-cap mutual funds. - Balanced Risk-Return Profile:
Mid-cap funds strike a balance between the stability of caps and their growth potential while maintaining moderate risk levels. So, opting for moderate risk in your portfolio could be a wise decision, especially if your investment horizon is long. - Diversification Benefits:
Investing in cap funds allows for risk mitigation by spreading investments across various market capitalisation stocks and not putting all your eggs in one basket! - Historical Outperformance:
Due to their growth prospects, mid-cap funds have historically outperformed large-cap counterparts. However, the risk associated with these investments is slightly higher than that of traditional large-cap schemes. So, weigh your risk appetite well before investing! - Volatility:
Mid-cap stocks tend to be less volatile than small and micro-cap funds but are usually more volatile than large-cap funds. So, allocating a small defined portion of your investments in the mid-cap segment could be a prudent investment decision!
Overall, considering these factors can help investors make decisions when exploring cap mutual fund options. Lately, mid-cap stocks have outperformed caps, attracting investors seeking returns due to the growth potential of these mid-sized companies. The robust Indian economy, driven by government investments in infrastructure and increasing consumer demand for goods and services, has further fueled the success of cap stocks. Additionally, the influx of investors and the growing adoption of systematic investment plans (SIPs) have contributed to the momentum of this market.
Recent Performance & Economic Impact
In recent times, mid-cap stocks have been shining brighter than large-caps! Why? Because of the greater growth opportunity these mid-sized companies offer and investors looking for better returns. Plus, India’s economy is booming! Huge government spending on infrastructure, rising demands for various products and services, and more money in people’s pockets have all helped mid-caps thrive. The rise in new retail investors and the popularity of systematic investment plans (SIPs) have also boosted this rally.
Taxation Details of Mid-cap Funds:
If you earn gains from equity funds, here’s the deal: gains from holding less than a year get taxed at 20% as short-term capital gains tax, while those held for over a year pay just 12% if earnings exceed ₹1.25 lakhs as long-term capital gains tax!
Who Should Consider Mid-Cap Funds?
Mid-cap funds are perfect for investors who plan to stay invested for a while (think at least 3-4 years) and want high returns while being okay with some chance of modest losses. If you have a good risk appetite and a comparatively longer investment horizon, consider investing some of your investments in mid-cap funds.
Wrap Up
In summary, mid-cap funds are fantastic for anyone looking for better returns than large caps but with less risk than small caps! They can make a valuable addition to any investment portfolio. Happy investing!