What Are Mid Cap Funds?

Mid cap funds are those funds which have to invest a minimum 65% of the total assets in equity and equity related instruments of mid cap companies. While the rest 35% of the assets can be invested in either large or small cap companies. Securities exchange board of India (SEBI) has recently recategorised mutual fund schemes. Under the new categorization rules, mid cap schemes are allowed to invest atleast 65% of its assets in only those companies which fall in between 101th-250th in terms of market capitalization.

Benefits of Investing In Midcap Funds

• Capable of generating higher returns over a long period of time
• Minimization of risk through diversification
• Professional management of portfolio

Are Midcap Funds Risky Than Large Cap Funds?

Yes, since these funds invest 65% of their assets in mid cap companies, they are more prone to volatility and hence are more risky than large cap funds as they invest at least 80% of their total assets into large companies which are quite stable.

Should I Go For Mid Cap Funds?

Yes, why not if your time horizon is minimum 5 years. These categories are capable of generating astonishing returns over long term and hence an investor should not deprive himself from earning huge returns. An individual in the age bracket of say 30-35 years can have an exposure of around 50%-60% in mid-cap funds. This will help an individual in building the requisite amount of corpus over a period and hence makes all financial goals achievable.

What Kind Of Returns Can These Funds Generate?

Since these funds invest most of their assets in stocks of mid cap companies, hence these funds are able to generate higher returns in the range of around 15%-18% over a period of time.

Further Reading