mid-capequitymutual-fund

What is mid cap fund?

Asked
Kavita Soni

A mid-cap fund refers to a kind of stock fund that allows us to invest in mid-sized companies. In mutual funds market, size of a company is determined by its market capitalization value. Market capitalization is nothing but the market value of a company’s outstanding shares.

If we consider life cycle of a business, mid-cap refers to companies which have achieved a middle level growth and are reflecting rapid growth year on year. To bring diversification to a mutual fund portfolio in terms of balancing the risk, mid-cap funds are considered as the most preferred solutions as compared to small-cap funds (funds of companies which are in phase of resolving initial setup challenges) and large-cap funds (funds of companies which are very well established in the market and hence provide marginal rate of growth).

Mid-cap funds are less volatile as compared to small-cap funds and carry lower risk to return ratio.  However, when compared to large-cap funds, mid-cap funds are more volatile and have higher risk to return ratio.

To balance risk in your portfolio, it is generally advised that you choose a couple of mid-cap funds and invest in them for a longer duration so that their performance is realized at true value. The reason being the dispersion of returns between best performing and average performing mid-cap funds is huge and hence you might let go certain funds which are not performing well, but at the same time if you have a good number of mid-cap funds in your portfolio, then you can embark on the better performing funds and ultimately increase the realizable returns of your portfolio.

Explore some of the best available mid cap funds here.

Below, I have attached two mid cap funds for your quick reference. Check out all the details of these including performance, returns and risk analysis.


Arpit Chandak

When mutual fund invest large portion of the capital of mid size, these funds are called mid cap funds. Here, size of company refers to the market capitalization of company.

  • Mid cap funds portfolio comprises of companies seeking growth opportunities and hence they have to potential to offer higher returns to investors.
  • Returns on these funds outperform large cap funds during upward market movement or bull market.
  • However, during the down market, they are more prone to fall as well.
  • The underlying stocks of mid cap funds are more volatile in comparison the large cap funds.
  • They have more risk exposure than large cap funds but are less risky than small cap funds.
  • They suffer from smaller capital base and hence, provide less liquidity.
  • Returns from these funds are taxed at 15% if they are sold before a year. After completion of one year, no tax is deducted.
  • However, through prudent stock selection and diversification across sectors, fund managers aim for better returns from mid cap funds. If you are looking to gain profits in short and medium term, these funds are ideal for you.

Top performing mid cap funds:

Pijush Kanti Biswas

Thinking of investing in an equity mutual fund, it is very crucial to decide on most appropriate market capitalization to choose the fund from – i.e. among large cap, mid cap, small cap, sectoral cap or multi-cap fund category. Market capitalization is calculated by multiplication of the number of outstanding shares company offered with the current market price of one share. Each category of market capitalization categories has its own advantages and disadvantages.

In mid cap funds, a large portion of investment is done in companies with medium market capitalization i.e. are bunch of 100-250 companies in a market after large cap companies. Mid cap funds show some of the high growth prospects as small cap funds and often outperforming large cap funds. But these funds are relatively less volatile as compared to small cap funds due to their larger capitalization. Mid cap funds are compact fund category for the equity market, falling somewhere between small and large cap funds and therefore are very popular among investors.

Recently in Indian market, big investors like mutual fund houses, started investing in mid-cap stock, because the share price of large caps has increased substantially. That results in the prices of the mid-caps, climbing upwards steadily and made them an attractive investment category with high growth potential.

So, to sum it up, mid-cap funds can be great investment instruments for investors looking for funds with high return possibilities, without the volatility of small caps and index-related returns like those of large cap funds.

Some examples of popular Mid-Cap Funds for 2017:

1. Mirae Asset Emerging Blue-chip

2. HDFC Mid-Cap Opportunities Fund

3. Invesco India

4. SBI Magnum


Happy Investing!

Tanya

Mid cap funds invest in stocks of mid sized companies. The size of these companies is decided based on the market capitalization of the companies. Market capitalisaton refers to the product of the company’s stock price and the number of outstanding shares it has. Mid cap companies lie between 100 and 250 on the scale of market capitalization. Such companies are considered to be developing companies with established businesses.

A mid cap fund lies between a large cap and a small cap fund. Mid cap funds tend to be riskier than large cap funds but at the same time offer higher returns and growth opportunities. These companies have a higher capacity to produce returns since they are more focused and dynamic as compared to larger, well established companies. But the returns are still less than that of small cap funds, along with lower risk. However, these funds are highly volatile and could lead to a loss if held for short term. Therefore, these funds are suitable for investors with higher risk appetite looking for higher returns in the long run. Returns from mid cap funds are taxed at 15 per cent if sold before one year of investment. And no tax post that.

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Ritika

To understand mid cap funds we first need to understand what is Cap that is capitalisation. Capitalization is the product of the company's stock price and the number of shares outstanding in the market. It is also commonly known as market capitalization. Suppose company XYZ has value of shares on NSE at Rs. 10 per share and has 1Lac shares outstanding then the market capitalization of that company is 10*1lac = 10Lacs.

Now, based on market capitalization companies can be classified as small cap, mid cap or large cap.


Large Cap companies: These are stocks of usually large and well-established companies that have a strong market presence and are generally considered as safe investments.


Small Cap companies: Small cap companies have smaller revenue and client bases, and usually include the start-ups or companies in the early stage of development.

Mid caps lie between large cap stocks and small cap stocks. Mid cap stocks are those that generally have a market capitalization within the range of Rs 50 billion and Rs 200 billion. (there's no exact consensus about it). These represent mid-sized companies that are relatively more risky than large cap as investment options yet, they are not considered as risky as small cap companies. They rank between the two extremes on all the important parameters like size, revenues, employee and client base.


Mid cap funds include the portfolio of such mid cap sized companies.

When one invests in mid caps for the long term, he may be investing in companies that could become tomorrow's runaway success stories. Generally speaking, mid cap stocks as an investment can bring you higher returns in 3 to 5 years as opposed to their big brother large cap stocks that can bring you moderate (yet safer) returns during this timeframe.

Examples of mid cap fund:

1) L&T Midcap Fund-Regular Growth

2) Aditya Birla Sun Life Advantage Fund

3)  DSP Black Rock Mid Cap fund-RP

4) BNP Paribas Mid Cap Fund -Dir (G)

5) ICICI Pru MidCap Fund - Direct (G)

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