What is a Mid-cap Mutual Fund and How to Invest
‘Cap’ stands for market capitalization which is the value of a company in the market. So, when we say a mid-cap mutual fund, it usually means investments made on companies that have a respective middle ranged Market capitalization. The listed stocks in the Stock market are categorised into Small-cap, Mid-cap, or Large-cap based on the company’s value or capital.
The Securities and Exchange Board of India (SEBI) has standardised a value for the Small, Mid and Large-cap companies to define them properly.
Large-cap companies - Top 100 companies as per market capitalization
Mid-cap companies - 101st to 250th as per market capitalization
Small-cap companies - 250 onwards as per market capitalization
Hence, mid-cap funds are the mutual funds that invest in the stocks of a mid-sized company. These companies rank between 101-250 +according to their market capitalization. These rankings can be followed through the Nifty 150 midcap index. The stocks of these companies offer their investors great growth potential.
Advantages of Mid-cap funds
Mid-cap funds have many advantages over small-cap and long-cap funds. Some of its advantages are:
1 . These funds offer great returns because the potential for growth is also great. These companies hold great potential to rise and become large-cap companies.
2 . These funds are less volatile and hence hold less risk in comparison to small-cap funds.
3 . The liquidity in these funds is reasonably high as a mid-cap fund has a lot of cash and assets on hand. Thus, we can buy and sell them easily.
4 . Mid-cap funds are useful in portfolio diversification. They have a better approach than large and small-cap funds in the selection of stocks.
According to research, mid-cap mutual funds have outperformed large and small-cap stocks several times for longer. So, a mid-cap mutual fund is a good investment option.
How to Invest In Mid-cap Funds?
Investment in Mid-cap funds can be done through mobile applications. It requires only a few clicks and correct investment choices. This type of fund comes with no entry load. But the investor has to pay an exit load only if he redeems the investment within 12 months from the date of allotment.
Three of the most common ways to invest in mid-cap mutual funds include -
1 . Through Asset Management Company (AMC) Website - It is a way in which you can eliminate all the intermediaries and invest your money directly. You can buy all the mid-cap mutual funds offered by the fund houses through their website. To buy a fund from the Asset Management Company’s website, you’ll have to download the application form and submit it with a copy of your PAN Card, KYC form, and initial cheque. After this procedure, you get access to invest in funds and monitor them according to your own convenience.
2 . Through your Demat account - You can open a Demat account through any trading app or website. Documents required for this procedure include Identity proof, Address proof, Bank account proof and Proof of your income.
3 . Through independent Mutual Fund investment apps/websites - These platforms give the provision to directly invest your money. You will have to give a small amount of commission to the service provider for every transaction. You can open an account within a few minutes on your Smartphone where you will have to provide digital copies of your documents.