Mid-cap funds are faster movers and shakers than large cap funds, but their growth potential must be seen against the industry and company they belong to.
The mutual fund universe in India is a dense but well-regulated one, offering different types of schemes as per a clearly-defined classification. To the inexperienced investor, the different kinds of schemes may become quite daunting. However, once you get around the jargon of it all, you can pick a scheme that aligns well with your risk profile and goals.
Most new investors looking for long term gains make a beeline for mid-cap equity funds. The ones you choose must be discussed well with the fund manager, with a look at the associated risk, costs, at al.
Exploring mid-cap equity funds…
The mid cap mutual funds are MF schemes that primarily offer exposure and investment in mid-cap companies in India. These companies are classified as mid-cap depending on whether they are emerging lights in their industry, or whether they come from an upcoming sector that is performing well. By virtue of their asset class, mid-cap equity funds offer a higher range of growth and better returns on your investment.
The mid cap stocks are to be viewed through the prism of high growth, but their volatility must be evened out over the long run. They invest your money in equities and equity-related instruments that involve mid-cap companies in India.
Why invest in mid-cap companies?
Mid cap equity funds offer several advantages, sometimes even over large cap funds if you were to compare the two. However, like all MF investments, the mid cap mutual funds must be chosen subject to your investment horizon, strategy and goals.
Consider the benefits of investing in mid cap equity funds in India:
- Leading fund houses in India offer well-presented mid cap stocks that are professionally-managed. Thus, not only do novice investors not have to involve themselves with the daily workings of the folio, they also get expert insights on the trajectory of the fund.
- The mid cap stocks offer a greater degree of diversification across different sectors. This reduces the element of risk while promising high growth.
- You can start with mid cap funds, then offer greater depth in the portfolio by adding large cap funds to the mix.
- The mid-cap equity funds are a good investment option to consider if there are definite long-term milestones to achieve, like an early retirement, or sending your child to foreign university, or even buying a second car.
The growth potential of the fund is further helped along by high exposure to equities, which is an asset class that normally beats inflation with long term gains. However, the high equity exposure also ups the ante on the risks associated with the fund. Also, it is not always possible to know the track record of new funds, especially those belonging to emerging business sectors.