Are you planning to invest in midcap mutual funds and but need a little more guidance about the investment strategy and associated risk? Mid-cap funds involve investing in mid-sized company stocks (companies, having caps between ₹5,000 crore but less than ₹20,000 crore).
The reason for investing in mid-cap funds is the potential high return, less analysis requirement prospective growth of the companies. There are some sorts of risk factors like unstable financial bubbles and value trap conditions of the midcap companies. However, if you choose the right fund to invest in and employ the right investment strategies, you can beat all the risks and relish high returns for sure!
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What are Mid-Cap Stocks?
Mid-cap stocks refer to the equities representing businesses or companies with medium market capitalization. Companies that fall under the ranking between 101 and 250 in the Nifty Index as per their market capitalization are typically considered mid-cap companies and their equity stocks are called mid-cap stocks.
Top Features of the Mid-Cap Stocks
The top-tier features of midcap mutual funds include:
Diversity: Varying in terms of returns and risks, mid-cap funds have extended reach whose margin borders both small and large-cap stocks. While some mid-cap companies are in their growth phase, thus offering higher returns and stability, others might still be in the development phase, offering moderate to low returns.
Low to Medium Risk: Certain risks are associated with any form of investment and midcap investment is no exception. But the risk is not as high as small-caps. Having lower chances of market volatility, mid-cap stocks ensure stability, but the constancy is not as high as the large-cap stocks.
Liquidity: In contrast to the small-cap stocks, the mid-cap ones are liquid. Mid-cap companies own reasonable credibility in the industry and their shares are definitely trustworthy. So, whenever you want to sell the shares, you can easily find buyers for it.
Possibilities of Growth: The best part about mid-cap fund investment is the higher chances of growth. The owners, meaning the mid-cap companies have a high potential to enhance their productivity, market share, and profit. So, if you stay constant in the investment program, you can surely see some progress and relish the benefits.
Things to Consider Before the Investment
If you follow a strategic investment plan, you can enjoy good returns, stability, and a minimal chance of meeting a loss. Here are a few aspects that you need to consider when investing in a mid-cap stock:
Plan Long-Term Goals: Midcap mutual funds usually take more than 5 years to provide good returns. In case you are willing to invest in one, consider it as a long-term investment plan like retirement, a child’s education, etc. Expecting a short-term return might not work with mid-cap stock investment.
Risk Tolerance Level: You need to consider your risk tolerance level before engaging in the investment program. For instance, if you are near your retirement age, and your risk-tolerance level is poor, you need to evaluate the risk-to-return rate minutely before putting forward your hard-earned money.
Return-Rate Calculation: Usually, mid-cap funds promise to offer market-beating returns. But if you choose to stop your investment and withdraw your returns midway, these mutual funds might disappoint you. So, you should carefully assess the investment returns and keep yourself dedicated to the investment program for the long run.
AMC rate: AMC charges refer to the assessment management company charge that the AMC Company holds annually. The charge can reduce your return rates. So, when choosing a mid-cap fund to invest in, make sure to choose one with less AMC charge with good records.
How to Calculate the Return on Mutual Fund Sip Calculator
The SIP calculators can help you determine your final returns. Before choosing any mid-cap fund, you should use it to determine the return value on the mutual fund sip calculator.
Usually, the SIP calculator uses the below-listed formula:
M = P × ({[1 + i]^n – 1} / i) × (1 + i) Here:
‘M’ refers to the maturity amount
‘P’ refers to the Principal you will invest with regular intervals
‘N’ refers to the number of payments that will be made upon the maturity
‘I’ means the interest rate periodically.
Imagine, you are investing 1000 per month for a year, with a periodic interest rate of 12%
Your monthly return rate would look like this:
12%/12 = 1/100=0.01
That means, Hence, M = 1,000X ({[1 +0.01 ]^{12} – 1} / 0.01) x (1 + 0.01)
Simply put, you can get around Rs 12,809 a year.
Note: The periodic interest rate can differ, influencing the estimated return value.
Top Midcap Mutual Funds
Are you new in the investment world and looking for some favorable mutual-cap funds with higher returns? In the following list, we have enlisted some reliable investment options, mentioning their return value
- Quant Mid-Cap Mutual Fund Direct-Growth: return (%) value in 3 and 5 years respectively 37.31 and 33.32%
- Mahindra Manulife Mid-Cap Fund Direct-Growth: return (%) value in 3 and 5 years respectively 30.63 -and 26.75%
- HDFC Mid-Cap Direct Plan-Growth: return (%) value in 3 and 5 years respectively 30.78 and 24.48%
- Kotak Emerging Equity Fund Direct-Growth: return (%) value in 3 and 5 years respectively 24.59 and 24.02%
Wrapping Up
Now that you have a clear idea of the basics of the midcap mutual funds investment program, choose an investment program and get started! Nevertheless, be very specific when choosing an online investment platform. Look for an app that has low broker fees, a user-friendly interface, and good ratings.
