Why midcap

Over the past 12 months, Indian markets have been outperforming global peers. Abundant liquidity, declining covid cases, upbeat corporate commentaries and low cost of capital lifted valuation multiples to stratospheric levels for high-quality names across sectors, said Motilal Oswal Financial Services. Never miss a story!

Stay connected and informed with Mint. Download our App Now!! It'll just take a moment. Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image. You are now subscribed to our newsletters. Things to Know Be Every mutual fund, be it debt or equity, has an underlying asset that generates returns for them. In the case of mid cap funds, the underlying asset is the stocks of mid-sized companies.

This means that the money invested by investors in mid cap funds is used by fund managers to buy stocks of mid-sized companies, which have a potential to generate good returns in the long haul.

These companies are categorized as mid cap on the basis of their market capitalization or market value of the company. SEBI has specified that companies ranked between based on their market capitalization will be put under the head of mid cap companies. Mid Cap companies, as the name suggests, lies between large cap and small cap companies. They have evolved from small cap companies and are striving to become large cap companies. During the growth phase of the economy, mid-sized companies tend to grow at a faster rate than large cap or blue chip companies.

On the other hand, during a slowdown, they get affected more. It is important to note that when we talk about mid companies, we are not talking about small or unknown companies. Higher Returns than Large Cap Funds: In comparison to large cap funds, mid cap funds have given higher returns in the past over a long run. Reason being, as large cap funds invest in companies that are already mature and well known in the market, they grow at a stable but relatively lower pace.

On the other hand, mid cap companies are future large caps and are where today's large caps were a few years back. During this journey to become big, they can deliver outstanding returns. As compared to small cap funds, mid cap funds are less risky. This is because stocks of small cap companies are relatively more volatile. That's because while mid cap companies are not as financially strong as large companies, in most cases, they have a stronger balance sheet than small caps and therefore also have a better ability to navigate tough market conditions.

Investors with a Long Term Investment Horizon: As we all know, big companies do not get built overnight. Since the underlying asset of mid cap mutual funds are companies that are yet to become big, investors need to be patient with their investments. Also, since these companies are not as financially strong as big companies, during a slowdown they might falter and take time to recover.

So, to truly reap the benefits of investing these funds, one should invest in it for 7 to years. Mid cap funds carry higher risk than large cap funds but also give investors the opportunity to earn market beating returns. So only those investors who have the appetite to take should pick this fund category.

Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights.

Measure content performance. Develop and improve products. List of Partners vendors. Your Money. Personal Finance. Your Practice. Popular Courses. Investing Stocks. What Is Mid-Cap? For companies, some of the appealing features of mid-cap companies are that they are expected to grow and increase profits, market share. Mid-cap stocks are useful in portfolio diversification because they provide a balance of growth and stability.

Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.

What Is Market Capitalization?