Are you someone who is planning to invest in a mutual fund? Also, you want to get a good return by taking a moderate risk? Then your one-stop investment should be in a mid-cap fund.
Now, let’s get started with the basics of Mid-cap fund.
Before that, we must have an idea of what is market capitalization. The market capitalization of a company is basically the size of the listed company. It is a product of the total number of outstanding shares of the company in the market and the current price per share.
The publicly traded companies categorize the market cap into three sections- Large-cap, Mid-cap, and Small-cap.
So, here is what you need to know about the mid-cap fund.
What is Mid-cap Fund?
Mid-cap Funds lie between the large-cap funds and small-cap funds on the basis of the company size. The mid-cap fund invests in companies with a market cap ranging between Rs. 5000cr- 20,000 cr. When the market is up, the mid-cap companies perform better than the large-cap funds. The mid-cap fund invests in mid-cap companies which are smaller than the large-cap companies in terms of- profitability, revenue earned, client base, employees etc. Mid-cap funds are quite riskier than large-cap funds but less risky than small-cap funds. Those who want higher capital appreciation with moderate risk, they can definitely go for mid-cap funds. There is a high possibility of getting a higher return if your investment period is more than 3-4 years.
To help you with your investment decision, here is the list of top 5 mid-cap funds in 2019.
|Name of the fund||Launch Date||1-year return (%)||3-year return (%)||5-year return (%)||10-year return (%)||Expense ratio (%)||AUM (cr.)||Return Since Launch (%)|
|L&T Midcap Fund||Aug 9, 2004||-15.07||13.53||24.21||23.18||2.17%||3,685||19.57%|
|Franklin India Prima Fund||Dec 1, 1993||-11.41||11.77||21.37||23||2.05%||6,573||19.72%|
|DSP Midcap Fund||Nov 14, 2006||-12.62||12.14||20.72||23.11||2.08%||5,704||14.53%|
|Kotak Emerging Equity Scheme||Mar 30, 2007||-13.75||12.37||23.12||20.61||2.14%||3,494||11.70%|
|HDFC Midcap Opportunities Fund||Jun 25, 2007||-13.73||12.56||21.18||23.79||1.98%||21,085||15.50%|
*Details as on Jan 11, 2019
Parameters to check before investing in Mid-cap Fund
Before investing in a mid-cap fund, you need to check some of the important parameters.
Here are the important parameters that you need to check before investing in a mid-cap fund.
- Past Performance of the fund- The first thing that you must evaluate before investing the past performance of the fund. Just don’t rely on the last one or two years’ performance. Check the fund performance through the bull and bear market for a good 7-10 years. The fund with consistent performance for 5-10 years should be your ideal choice of investment.
- Quality of the fund house- A good fund house must have a well-experienced research team for managing the risks. The quality of the fund house is reflected on how the equity funds have performed in the past. The fund performance should be consistent in both bull and bear market. Also, if most of the equity schemes of the concern fund house are capable of generating performance that is exceeding the benchmark, it shows that the fund house has taken risk management strategies and has successful investment decisions.
- Experienced Fund Manager- For a good performance of mid-cap funds, experienced fund managers play a vital role. As the mid-cap fund is quite riskier, so it needs a qualitative analysis. For that, the fund manager with a strong and dependable performance record is very essential.
- Investment Tenure– To be able to benefit from the mid-cap fund investments, you should have patience and should continue your investment for a minimum of eight to ten years. The mid-cap fund investments are quite volatile for a short time period and manage the performance if the investments are for a longer time period.
- Expense Ratio- It is a certain amount that is charged by the Asset Management Company (AMC) to manage your invested money in the mutual fund. Try to invest in mid-cap funds which have lower expense ratio and better performance for a longer time period.
- Risk-adjusted return from the Fund– As said earlier, mid-cap funds are risky. But some funds are successful in managing the risk in a better way yielding a good amount of return. So, try to invest in that mid-cap funds which give a good return with adjusted risk.
Benefits of investing in Mid-cap funds
Here are some of the key benefits of investing in a large-cap fund.
- Mid-cap funds give high return than large-cap funds and have a lower risk factor than the small-cap funds.
- The mid-cap companies have always been in the market for a longer time period. So, there is no fear of loosing out your money.
- If you see the track record of the funds, it will be very easy to figure out that, the mid-cap funds perform better than large-cap funds.
- Compared to a small-cap fund, a mid-cap fund offers more liquidity.
- As compared to large-cap funds, generally mid-cap funds are underfollowed in stock markets. So, you can easily get fast growth in your mid-cap investment.