What are mid cap mutual funds?

Mid cap mutual funds are a category of mutual funds that primarily invest in stocks of mid-sized companies. As per SEBI circular dated 6th October 2017, mid cap companies are typically categorised as those ranked from 101st to 250th positions in terms of full market capitalization.

Mid cap mutual funds pool money from multiple investors and invest it in portfolio comprising mid-sized company stocks.

Benefits of mid cap mutual funds

Growth potential

One of the primary benefits of investing in mid cap mutual funds is the growth potential they offer. Mid-sized companies are often in a phase where they are expanding their operations, entering new markets, and innovating. This growth potential can translate into a better return potential for investors. Mid cap funds can be a good choice for those looking to capitalize on the growth of companies that are not yet considered large caps but have the potential to become one in the future.

Diversification

Diversification is a key strategy for managing risk in any investment portfolio. Mid cap mutual funds typically hold a diversified portfolio of mid-sized company stocks across various industries and sectors. This diversification helps to spread risk and reduces the impact of poor performance of single company. Investors benefit from the inherent diversification offered by these funds without the need to pick individual stocks.

Less volatility than small caps

While mid cap stocks can still be subject to market volatility, they tend to be less volatile than their smaller counterparts (small-cap stocks). This reduced volatility can provide investors with a more stable investment experience compared to small cap funds, which can experience significant price swings.

Active management:

Many mid cap mutual funds are actively managed, meaning that experienced fund managers make investment decisions based on research and analysis. This active management can lead to better stock selection and the potential for outperformance compared to passive investment strategies.

Long-term growth:

Mid cap funds are often suitable for long-term investors who are willing to hold their investments for several years. Over the long run, mid-sized companies may grow into larger ones, potentially leading to capital appreciation.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.