1. What are Mid Cap Equity Funds?
Mid-cap companies are those that cover 80 to 90 percent of the entire market cap of all the BSE listed companies. Mid-cap companies have a market capitalization of INR 500 to INR 10,000 crores. You can find mid-cap companies in the BSE -Midcap Index. Mid-cap funds invest only in mid-cap companies. With the new guidelines by SEBI on the categorization of mutual fund schemes, mid-cap segment is defined by contains the stocks that are ranked from 101 to 250 by market capitalization. The value of the 100th ranked stock in terms of market capitalization is worth INR 30,0000 crores. The 250th ranked stock has a value of roughly INR 9,500 crores.
ClearTax can help you build your very first mid-cap fund.
2. Who should invest in mid-cap equity funds?
Mid-cap stocks have a reputation of being usually under-researched and under-valued and if researched well you may find stocks with the potential for growth. Log in to ClearTax to sample the handpicked mid-cap equity funds put together by our financial experts. Investing in mid-cap funds is not recommended for new or first-time investors. If you think that you can tolerate high risk and can commit to an investment horizon of about seven to 10 years, this may be an option for you.
3. Things to consider as an investor
a. The performance of the mid-cap equity fund
You must evaluate the performance of the mid-cap fund first. Check the performance of the mid-cap index through the bullish and bearish market cycles. Since the mid-cap companies are relatively new or not that extensively researched, it takes a keen eye to spot the ones with potential. You may begin by checking the rating of the fund and the consistency of its performance.
b. Investment Horizon
To benefit from mid-cap funds, you must be willing to give your funds a time period of at least seven to 10 years. Equity investments are volatile in the short run and make more sense from an investing point of view to hold for longer.
c. Your age
The compounding benefits of equity funds can really only be experienced with time and as a young investor, you will have the advantage of age on your end. For an investor who is nearing retirement or is already retired, investing in balanced funds would be a much better option. Age is, therefore, an important factor for consideration.
d. Expense Ratio
Understand the costs involved in investing in mid-cap equity funds. There will be a fee charged by the AMC for managing your fund. There may also be a commission to a broker or a distributor. Try and pick a fund that comes with a lower expense ratio.
e. Picking an experienced fund manager
Get investment advice from an experienced and expert fund manager. Choosing mid-cap funds, which tend to be riskier, requires qualitative analysis. The fund manager that you pick must have a strong performance record.
f. A quality fund house
The choice of a fund house must fulfill certain criteria like an experienced in-house research team that has good coverage and techniques to manage risk, etc. The performance of the fund during both the good as well as the bad cycles must be taken into consideration.
g. Your risk appetite
The risk quotient of equity fund varies, unlike its debt counterparts. Even within equity funds, mid cap and small cap funds are the riskiest when compared to balanced funds. If your risk tolerance is high, you may think of investing in mid-cap funds.
h. Tax planning
You might want to consider taking a closer look at your tax saving options. Have a tax planning fund that is commonly referred to as ELSS (Equity Linked Saving Scheme). These funds will give you the benefit of saving income tax under Section 80C.
Log in to ClearTax for further details on ELSS and tax savings schemes.
4. How to invest in mid-cap equity funds?
Investing in Mid Cap Equity Funds can be done conveniently at ClearTax.
Follow these simple steps and you can start your investment journey:
Step 1: Sign in at ClearTax.in
Step 2: Enter your personal details – the amount of investment and the period of investment
Step 3: Get your e-KYC done. It takes less than 5 minutes
Step 4: Invest in your favorite mid cap equity fund at ClearTax from amongst hand-picked mutual funds
5. Top 5 Mid Cap Equity Funds in India
Based on Mid Cap Equity fund performance indicator values, listed below are some of the top equity funds. The rankings done here are for a consolidated list of mid-cap equity funds on a 1,3 and 5-year return basis.
|1 year||3 year||5 year|
|Canara Robeco Emerging Equities Fund-Regular Plan||14.59||18.75||31.21|
|Mirae Asset Emerging Bluechip Fund-Regular Plan||13.99||20.42||30.94|
|L&T Midcap Fund||19.61||20.94||30.70|
|Aditya Birla Sun Life Pure Value Fund||18.62||19.72||30.35|
|Edelweiss Mid Cap Fund-Regular Plan||25.77||17.98||29.33|
Note: This is a representative list based on key metrics, dated April 25, 2018. It does not serve as a recommendation to these funds, nor does it claim to be the only correct way to rank funds.
Mutual funds are subject to market risk. Seek guidance before making investment decisions. Reach out to our team of financial experts at ClearTax to gain further guidance on investing.