Best mid-cap mutual funds
aim at generating benchmark beating returns when the markets are favourable. Investors must note that mid-cap funds are much riskier than large-cap mutual funds but less risky than small-cap mutual funds.
1. What are Mid-Cap Mutual Funds?
The market capitalisation of mid-cap companies lies in the range of Rs 500 crore to Rs 10,000 crore. Mid-cap funds are a class of equity mutual funds that invest in the stocks of mid-cap companies. A company’s size is a crucial factor to be considered while investing in equity-linked instruments. This is because the set of risks and opportunities predominantly depends on the size of the company. Mid-cap companies have the potential to beat the benchmark and large-cap funds when the markets are bullish. This is possible as the underlying stocks will tap into the growth opportunities.
2. Who Should Invest in Mid-Cap Mutual Funds?
Investors looking at options to accumulate wealth faster by willing to take some risk can invest in mid-cap funds. Mid-cap companies are capable of providing higher returns while being volatile on the stock index. Investors who are ready to face volatility of these stocks in expectations of excellent returns may consider investing in these funds.
3. Advantages of Mid-Cap Mutual Funds
Mid-cap funds have generally outperformed large-cap funds at times when the markets are favourable. The very nature of the mid-cap funds makes the trend to continue for quite some time. The mid-cap funds are relatively underfollowed in stock markets as compared to large-cap funds. Mid-cap funds provide investors with an excellent opportunity for faster growth of their capital by investing in these funds.
4. Things an Investor Should Consider
Though mid-cap funds perform very well during bull runs, their value may go down when the market sentiment is dropping. Also, in the case of high-quality stocks, mid-cap funds are not appropriate since they have a higher risk factor involved. Mid-cap stocks can be affected by the liquidity constraints due to their smaller capital base, i.e. the number of shares offered by the company. Since the underlying shares are characterised by lower market capitalisation and limited liquidity, these funds tend to follow cycles of bullish and bearish. This is based on the mirroring of the stock indices in general.
5. Top 5 Best Mid-Cap Funds
The following table shows the best mid-cap funds. The funds are ranked purely based on the returns offered over the last three years. You may use other factors such as expense ratio, exit load, returns offered over different time horizons such as one year, five years, and ten years to rank funds as per your requirements.