Mid-Cap Mutual Funds in Focus: Analyzing performance and future potential for wealth creation

Firstly, you must realise that medium-sized companies are past the start-up phase, but are still not as large or established as big corporations. Is this bad? Nope!  This gives them more room to expand. Such companies can increase sales, enter new markets, or raise profits faster than large caps.

When the economy or market sentiment is positive, mid-cap funds may deliver stronger potential returns than large-cap funds during bullish phases. For a better understanding, check out some other benefits of investing in mid-cap mutual funds:

1. You Can Enjoy Diversification Benefits

   Adding a mid-cap fund can change the mix of companies in your portfolio. Large-cap funds usually hold popular household names, whereas mid-cap funds include companies that are less represented or established.

   The potential benefit? You may get exposure to different:

   • Business models

   • Industries

   • Growth cycles
     
     In this way, by investing in mid-cap category funds, you may lower concentration risk in market capitalization. Such a diversification also reduces the chance that a single sector or a few big companies will dominate the outcome of your overall portfolio.
      

2. You Can Accumulate a Sizeable Corpus in the Long-Term 

   As mentioned before, most mid-cap companies are in a growth phase. Given time, they may become much larger and more profitable. Thus, when you stay invested for the long-term (say 5 to 10 years), you can:

   • Capture that growth potential

   • Smooth out short-term market swings/ volatility

   • Potentially Benefit from compounding (earnings growth turning into higher stock prices)
     
     Want to gain the most? You may consider investing regularly (via monthly SIPs). This can reduce your risk of buying at market highs and may let you benefit from rupee-cost averaging.
     
      

3. You May Get the Chance to tackle Inflation
   
   Inflation erodes the purchasing power of most fixed-income products, such as traditional investment instruments. However, this rule may not apply to equity investments, such as mid-cap funds. That’s because they can increase in nominal value over time because companies:

   • Raise selling prices

   • Grow earnings

   • Expand their business
     
     That may make mid-cap funds a candidate for achieving potential returns above inflation over long horizons.

Mid-cap mutual funds may offer good growth potential. However, they carry certain risks that investors must understand before investing. These funds invest in medium-sized companies that are still developing and expanding their market position. Because of this, their stock prices are highly sensitive and can fluctuate as per market conditions. 

Besides, mid-cap companies may also struggle if their business strategies or leadership decisions do not deliver as planned. For more clarity, check out some of the other types of risks associated with mid-cap investment funds:

 For detailed Risk Factors, please read Scheme Information Document of the Mid Cap Category Schemes.

If you are a comparatively a moderate risk investor in equity exposure considering Large & small cap equities, with a long-term investment horizon, you can consider investing in the mid-cap mutual fund offered by Tata Mutual Fund™. scheme comes with multiple plan options, including Growth and IDCW (Income Distribution Cum Capital Withdrawal), and is available in both Regular and Direct plans.

Also, you can start investing through a SIP from ₹100 or a lump sum of ₹5,000  . Let’s check out some mid-cap investment fund schemes:

(An open-ended equity scheme predominantly investing in mid-cap stocks)

Tata Mid-Cap Fund may invest at least 65% of its funds in equity and equity-related instruments of growth-oriented mid-cap companies. It can give investors long-term capital appreciation/ growth. However, returns are not guaranteed.

Be aware that the fund’s performance is compared with the Nifty Midcap 150 Total Return Index, and NAVs are published daily on Tata Mutual Fund™ and AMFI websites.

Other category scheme (i.e. index) that has exposure to Mid Cap companies.

(An open-ended fund replicating/tracking the Nifty Midcap 150 Index (TRI))

The Tata Nifty Midcap 150 Index Fund may give returns similar to the performance of the Nifty Midcap 150 Total Return Index (TRI), subject to the tracking error. However, the fund does not guarantee any returns. For those unaware, NIFTY Midcap 150 represents companies ranked 101st to 250th (based on full market capitalisation) in the NIFTY 500.  

It is an open-ended scheme, so investors can buy or sell units on any business day at the prevailing NAV. Redemption payments are generally made within three working days. The NAV is calculated daily and published on Tata Mutual Fund’s and AMFI’s websites.
 

(An open-ended equity scheme investing in both large-cap and mid-cap stocks)

Tata Large and Midcap Fund may provide investors long-term capital growth potential. The fund’s performance is compared against the Nifty Large Midcap 250 Total Return Index (TRI), which is made up of:

• 100 large-cap companies (from the Nifty 100 Index)

  and

• 150 mid-cap companies (from the Nifty Midcap 150 Index).

In this index, large-cap and mid-cap stocks each make up 50% of the total weight. Every three months (quarterly), the weights are adjusted back to 50% each to maintain this balance.  

The Tata Large and Midcap Fund may offer long-term capital appreciation, but the returns are not guaranteed. 

So now you know that mid-cap mutual funds invest at least 65% of their money in mid-sized companies ranked between 101 and 250 by market capitalisation. These companies usually offer higher growth potential than large caps, but can also be more volatile and may fall sharply during weak markets.

Thus, such funds are suitable for investors who can stay invested for several years and can handle short-term ups and downs. While equities often beat inflation, returns can change from year to year and are not guaranteed neither assured. As an investor, you may always consider taxes, fund expenses, and transaction costs when estimating your actual gains.

If you are looking for quality mid-cap investment funds, you can explore the various schemes offered by Tata Mutual Fund™. Some options you may consider are, Tata Mid Cap Fund, the Tata Nifty Midcap 150 Index Fund, and the Tata Large and Midcap Fund. You can start investing in these schemes with a SIP starting from just ₹100 or a lump sum of ₹5,000.

None of the Tata Mutual Fund Schemes offers guarantee and/or assurance for the returns, performance & capital invested. All the above scheme are “Very High” Risk category schemes.