Mid Cap Mutual Funds

The primary objective of mid-cap funds is to gain long-term capital appreciation by means of investments made in equity instruments of a mid-cap company. The risk of investment in a mid-cap company is predominantly higher than large-cap and small-cap companies.

Benefits

The following are some of the benefits of investing in a mid-cap company:

1. Mid-cap companies are not as extensively researched as large-cap and small-cap companies. However, the potential for building wealth is extremely high and can happen in a very short time frame.
2. Growth from mid-cap companies come with very heavy risks and requires constant monitoring to achieve high returns.
3. Since the investors' portfolio is diversified across all sectors it is easy to manage the risks involved.
4. In the long-run, equity instruments have a higher potential to withstand inflation and create long-term wealth.
5. Financial goals are easier to achieve when compared to other growth plans.

Things to keep in mind before investing in mid-cap equity funds

1. Reviewing performanceIt is essential to conduct a thorough evaluation of a fund before choosing to invest. Evaluating the performance of the fund on the market cycles can give investors a fair picture of the fund performance. One of the best ways to spot a fund with good potential is to study the consistency of its performance.
2. Long-term investmentTo truly reap the benefits of a mid-cap equity fund investment, investors should be willing to make a somewhat long-term commitment towards their investment. Ideally, investors should be willing to allow the funds to grow for a minimum of 7 to 10 years. This is due to the volatile nature of equity investments and it would be more beneficial to the investors to invest in the funds long-term.
3. Choosing a fund managerMid-cap equity investments come with extremely high risks and the lack of research into their performance makes it that much more difficult to gauge the potential for growth. Therefore, investors should consider hiring an experienced fund manager to monitor their investment.
4. CostWith most investments that are managed by Asset Management Companies (AMC), a certain fee is charged to manage the fund. Additionally, investments made through a broker come with a brokerage fee. Evaluating AMCs and taking into account the expense ratio of the fund should also be a determining factor for an investment.
5. AgeMid-cap equity funds are probably best suited for investors who are still young and can take advantage of the high risks that come with an investment of this type. For individuals who are older, investing predominantly in debt instruments might prove to be more lucrative.