Mid-Cap Mutual Fund Its Feature, Advantage and
Disadvantage
Mid-cap mutual fund is a type of mutual fund which
invests money in medium and small sized companies. There is no specific
classification of the size of the company. But according to a general
classification, a medium-sized company has a market capitalization of more than
Rs 500 crores but less than Rs1000 crores, and a small-sized company has a
market capitalization of up to Rs 500 crores. Mid-cap funds are high-risk
funds. They generate high-returns if there is a positive movement in the index.
Mid-cap are readily available for investment because they belong to less
recognized companies. The growth opportunity is higher in mid-cap funds when
compared to large-cap funds.
Regular investors and
foreign investors have switched to mid-cap companies from large-cap companies
because the market prices of large-cap funds are continuously increasing.
Mid-cap companies are those companies which are under research by the
investors. They are yet to be identified in the market. So the growth potential
is always higher in funds provided by mid-cap companies. The investors also
have the chance of earning double than their expectations at times. These
companies are also termed as "Wealth Creators" by some investors.
They also have the capability to become a large-cap company if these companies
are regularly progressing. But mid-cap funds are volatile in nature so they
have the tendency to fall just like a pack of cards when the market crashes. So
it is important to be cautious when you decide to make investment in a mid-cap
mutual fund. However, it is a good investment option if an investor wishes to
have a diversified investment portfolio.
According to a mutual fund
tracking entity, it is believed that mid and small cap mutual funds have
generated an average return of 19.71% for three months, which is higher than
large capability mutual funds that gave an average return of 14.86%. It is good
to compare both the types of mutual funds because they are opposite to each
other. Sometimes the mid cap and small capability companies follow the footsteps
of large capability companies, but sometimes it is exactly the opposite.
However, it is truly believed by many experts and investors that mid capability
and small capability funds can boost the performance of the investment
portfolio.
At times the mid and small
cap funds tend to outperform large cap funds, but that does not mean that an
investor should substitute all the large cap funds by mid and small cap funds
in the portfolio. The upswing in the mid and small cap companies in the recent
times is only because of lower valuation made in December 2011. However, the difference
between the valuations of large and midcap companies has been reduced substantially.
The large cap funds are valued lower than their average returns in the long
run. Therefore these funds are more attractive for investment than mid cap
funds when the funds are compared only on the basis of its value. But if your
investment objective is high-growth than mid and small cap funds are a good
option.
Mid cap fund may
performance better than large cap funds in the future because they are undervalued
funds. Investors should buy mid cap funds after making a Systematic Investment
Plan (SIP) as it will help them to minimize the timely risk especially when
they are planning for a long-term investment.
Features of Mid-cap
Mutual Funds
Below mentioned are some of the basic features of a mid-cap fund.
Below mentioned are some of the basic features of a mid-cap fund.
They provide long-term
growth potential
The market price of
mid-cap funds fluctuates frequently in a short-term
These funds tend to
reinvest the earning into the company in order to boost the company growth
They give very little
dividend to their investors.
They are volatile in
nature
They are less risky than
large-cap mutual funds
These funds belong to
companies that are less recognized in the stock market.
Advantageous of Mid-cap
Mutual Funds
The benefits of investing into a mid-cap mutual fund are mentioned below.
The benefits of investing into a mid-cap mutual fund are mentioned below.
They belong to companies
that are under research by the market so they have high-growth potential.
These funds may provide
high returns if the market price of the fund is continuously rising. It might
generate returns which are double than your expectations at times.
They are considered to be
a low-risk type of mutual fund when compared to large-cap mutual funds.
Mid-cap mutual funds have
more chance to prosper than large-cap mutual funds
Mid-cap and small-cap
funds are low profile and safer than large-cap mutual funds. They are a good
option for investors who's investment objective is to have long-term benefits
rather than short-term gains.
Risk of Investment
Mid-cap funds belong to those companies which are not well know in the stock market so chances of many investors buying the funds of that particular company are quite less. Secondly mid-cap companies are more prone to the risk of manipulation and fraud because these companies tend to neglect the risk control measures. Another risk involved in a mid-cap mutual fund investment is the risk of default. This is an uncontrollable risk which comes with every type of stock market investment. Risk of default is the risk of interested rate fluctuation and sudden changes made by the government in the economic and financial policies of the country.
Mid-cap funds belong to those companies which are not well know in the stock market so chances of many investors buying the funds of that particular company are quite less. Secondly mid-cap companies are more prone to the risk of manipulation and fraud because these companies tend to neglect the risk control measures. Another risk involved in a mid-cap mutual fund investment is the risk of default. This is an uncontrollable risk which comes with every type of stock market investment. Risk of default is the risk of interested rate fluctuation and sudden changes made by the government in the economic and financial policies of the country.
Best Performing Mid-cap
Mutual Funds in India
If you are thinking of making an investment in some mutual funds, then here is a list of some of the best performing mid-cap mutual fund companies in India.
If you are thinking of making an investment in some mutual funds, then here is a list of some of the best performing mid-cap mutual fund companies in India.
Birla Sun Life MNC Fund
(G)
HDFC MidCap Opportunities
Fund (G)
SBI Magnum Emerging Busi
(G)
Birla Sun Life Dividend
Yield Plus
IDFC Premier Equity-A (G)
Tata Dividend Yield
HDFC Equity
HDFC Growth
Tata Equity PE
Quantum Long Term Equity
The investors should read
the offer document provided by the fund carefully before finalizing the
investment decision. According to the experts, the mid and small cap companies
perform better and rise faster when the market is returning back. They return to
the phase of growth when the economy comes back to the normal position. That is
the reason why more investors seek to invest in mid cap or small cap companies.
These funds are less risky and do not harm your portfolio as much as large cap
funds do.
Mid-cap mutual funds are
best investment option for those investors who are not risk-takers. These funds
generate moderate returns over a period of time. They are considered best for
long-term investment rather than short-term investment. This is because mid-cap
funds take a long time to perform well as they belong to a less recognized
family of mutual funds.