Beginners Guide on Mid Cap Funds

The Indian equity market is the most dynamic and profitable, alluring foreign investors to invest in growing their capital. Almost all seasoned investors prefer to opt for large-cap funds when investing in mutual funds. However, it is also observed that aggressive investors prefer to invest in mid-cap through mutual funds. Mid-cap funds invest in companies with higher market capitalization than small-cap companies and lesser than large-cap companies.

Mid-Cap funds can be an outstanding choice for investors who are willing to take a small risk for the potential of higher returns. But before investing, always be aware of everything that comes under territory.

And if you are new to the term, this article will help you understand what Mid-Cap Fund is and provide a comprehensive guide on how it will benefit you in ultimately achieving your financial goal.

What are Mid Cap Funds?

Mid Cap funds refer to the schemes funding in the mutual fund houses with market capitalization between INR 5,000 to 20,000 crores. Almost all Indian Asset Management companies offer mid-cap funds as a part of a fund catering to all types of stocks. These companies have a market capitalization of up to $ 10 billion, which makes them smaller than large-cap but more reliable and profitable than small-cap companies.

Mid-cap funds motivate mid-sized companies to grow and become larger by providing investors with capital appreciation. In simple terms, mid-cap mutual funds invest in stocks of mid-sized companies to assist their growth.

Benefits of Mid-Cap Funds

  • Helps in wealth creation
  • It diversifies your investment
  • Provide Professional Fund Management
  • You can start with a small amount and increase your investment

Guide to Choose Best Mid-Cap Mutual Fund

Given the clear understanding of investing in Mid-cap Funds, now it comes to investment. It’s important to choose a nest mid-cap fund for your investment. Here are the key parameters you must consider to weigh your Mid-cap scheme.

1.  Determine your investment goals and Risk Tolerance

To invest in a mid-cap fund, it’s crucial to establish your investment objectives and level of risk tolerance. You can analyze by considering the factors including:

●      Financial Goals

You must be clear about your financial goals, whether they involve long-term wealth creation, retirement planning, children’s education, children’s marriage, repaying the debt of any existing loan, health issues, or another specific milestone. This will ease you into calculating your financial goals and the capital you require.

●      Time Horizon

Determine the duration for which you want to stay invested. Mid-cap funds are considered best for providing a 5 to 10 years time horizon.

●      Risk Tolerance

Evaluate your comfort level with risk. Consider and stay sure of how much risk you will take and whether you can withstand short-term market fluctuations.

2.  Researching and Selecting the Mid-Cap Fund

When selecting a mid-cap fund, it’s important to conduct thorough research.

●      Fund Manager Track Record

Evaluate the record of the fund manager you are planning to invest with. Trace their consistency in delivering the returns.

●      Fund Expenses and Fees

Compare the expense ratio and fees associated with different mid-cap funds.

●      Fund Performance and Risk Measures

Evaluate the historical performance of the mid-cap fund of the Mutual fund house.

●      Fund Liquidity

Consider the fund size and liquidity. Liquidity is important to ensure you can easily buy and sell funds units when needed.

3. Performance and Mid-Cap-fund Historical Data

When analyzing the performance of mid-cap funds, it is important to consider the following:

●      Comparative Analysis

Compare all the mid-cap fund houses and their indexes and evaluate how it has benefitted all the investors.

●      Invested Style and Market Condition

Understand the fund’s investment style, including growth-oriented and value-oriented. And how it has performed in different market scenarios and their specific market cycle.

4.  Diversify your Mid-Cap Fund Portfolio

Diversification is the key aspect of growth and solid income. Mutual funds are considered more diversified at low-cost and convenience and are professionally managed. Hence instead of all the eggs in one basket (investing in the same organization), diversify your investment. Investing in one firm will not show any exceptional growth.


Mid-cap mutual funds can be a great investment option for investors looking to invest in high-growth potential. While mid-cap funds carry more risk than large-cap funds, they are still more reliable than short-cap funds. However, it is always essential to conduct thorough research and consider all the factors before investing your hard-earned money.