Mid cap funds are those mutual funds, which invest in small / medium sized companies. As there is no standard definition classifying companies as small or medium, each mutual fund has its own classification for small and medium sized companies. Generally, companies with a market capitalization of up to Rs 500 crore are classified as small. Those companies that have a market capitalization between Rs 500 crore and Rs 1,000 crore are classified as medium sized.
Big investors like mutual funds and Foreign Institutional Investors are
increasingly investing in mid caps nowadays because the price of large
caps has increased substantially. Small / mid sized companies tend to be
under researched thus they present an opportunity to invest in a company
that is yet to be identified by the market. Such companies offer higher
growth potential going forward and therefore an opportunity to benefit
from higher than average valuations. Mid cap companies are looked upon
as wealth creators and have the potential to join the league of large
cap companies. Such companies are nimble, flexible and can adapt to the
changes faster. One of the challenges that fund managers of mid cap
funds face is to identifying such companies.
But mid cap funds are very volatile and tend to fall like a pack of
cards in bad times. So, caution should be exercised while investing in
mid cap mutual funds. Mid cap funds are a good option in case the
investor wants to add some diversity to his portfolio.
Top Mid Cap Funds in India