What should you known before investing in midcaps? Read and find out.
The equity investment is one of the most popular ways to begin trading in mutual funds. They are present in many flavours in order to suit the discrete needs of the investors. Out of all kinds of equity options, midcap funds are very popular among the Indian investors. These funds are known for their outstanding performances in the long run, besides good safety features that makes them one of the best ways to create a solid portfolio. Due to their increasing demand, midcaps have started coming in from all directions and have made it difficult for the investors to choose the best options.
In this article, we’ll learn some intriguing facts about the midcap category that’ll help you pick a good fund for your portfolio. You’ll also get to know about this season’s best midcap funds, so that you could quickly resume to investing in them and start building wealth for the future.
What are Midcap Funds?
The market is divided into three major segment – small cap, midcap, and large cap. The midcap division of the market consists of the midcap companies that have a market capitalisation in the range of ₹500 - ₹10, 000 crore. These companies have crossed their initial formation stage and are now at an advanced level of operation, hence, can provide better stability and returns in comparison to small cap companies.
Midcap funds are those that invest in such companies. Typically, 80-90% of the assets of a midcap fund are invested in these mid-sized companies, together with other stocks and sometimes debt securities. The mid-sized companies are listed on BSE under the new index series called the BSE-Midcap Index. As per the guidelines issues by SEBI, the mid-cap funds buy stocks in the companies that are ranked from 100 – 250 as per their market capitalisation.
Who Should Invest in these Funds?
Midcap companies maybe those that have a dominant position in the market, or may even include the new participants. Their profits can range from very high to moderate, hence it is important that you make a careful selection of the funds before you proceed with investing in them. Typically, a midcap fund in India contains lesser volatility than the small cap funds and dwells the power to achieve great wealth in the long run.
So, if you’re one of those investors who is ready to take some risk for achieving great results and also have a determination to invest for a long period of about 10 years, then you can proceed confidently with an investment in midcaps. However, it is advised that you should keep your financial advisor in loop for every decision that you make. This will ensure that you’re moving forward on the right path and are not digressing from the main goal.
Practices to Avoid
It is true that midcap mutual funds are a lucrative venture. But there are certain points that you should remember while planning an investment in them. Here are a few things that you must follow in order to ensure a safe and fruitful investment: -
• Never Mimic Others
One of the foremost rules of investing is to strictly avoid mimicking others. Every individual is different, and may have demands and aspirations that may or may not match with yours. Hence, it is important that you shall identify your own needs and limitations and plan to invest accordingly.
• Set Your Parameters Carefully
While investing in midcap funds, it is important to understand your investing personality and set the parameters accordingly. If you’re a conservative investor, then you must try to buy a plan that is less volatile. Alternatively, you should balance out the risk with diversification. Once set, you should not alter your parameters as it can hurt your investment’s long-term value and may render you poor results.
The Best Midcap Funds to Invest in India
Knowing that midcap funds are good investment options is not enough. You should also know which funds are exactly the ones that you should be looking for. Here are some honorary mentions of the top midcap funds in India: -
• L&T Midcap Fund (G)
• HDFC Midcap Opportunities Fund (G)
• Kotak Emerging Equity Scheme (G)
• DSP Midcap Fund (G)
• Axis Midcap Fund (G)
Now that you know what and where to look for, don’t waste a single minute! Go and find out the best midcap fund that can satisfy your objectives.