Have you been seeking investments that offer a balance between risk and return? Then, mid-cap mutual funds are a smart choice. Mid-cap mutual funds primarily invest in medium-sized companies that rank between the top 101 and 250 by market value in the stock market.
Positioned between large-cap and small cap companies, mid-cap companies combine steady performance with strong growth potential. So, mid-cap mutual funds offer exposure to great investment opportunities during the long-term.
Here are some key benefits of investing in mid-cap mutual funds.
High Growth Potential
Mid-cap companies are in the phase of growth. They are capable of becoming financially stable large-cap companies in the future. This higher growth potential can generate greater value for you over time.
For instance, as of 6th May 2025, Motilal Oswal Midcap Fund delivered 3Y returns of 29.80% and 5Y returns of 39.43%. Although past performance is not indicative of future results, such growth is often seen in mid-cap funds.
Higher Returns than Large-Cap Funds
Although large-cap companies are more stable, their growth is generally slower. On the other hand, mid-cap companies explore new opportunities and expand their operations. This dynamic growth offers better and higher returns over the long term.
For instance, as of 6th May 2025, Invesco India Midcap Fund delivered 3Y returns of 26.54% and 5Y returns of 32.27%, while Invesco India Largecap Fund delivered 3Y returns of 18.82% and 5Y returns of 24.07%. While past performance does not guarantee future results, mid-cap funds tend to deliver higher returns than large-cap funds.
Balanced Risk and Return
Mid-cap mutual funds offer better returns than large-cap funds and are less riskier compared to small-cap funds. So, you can expect a balanced approach to investing that is suitable for investors with a moderate risk profile.
Lower Expense Ratio
The financial institution handling your mutual funds will charge an annual fee to manage your investments. It will be a percentage of your investment used to handle the administration and management costs. The expense ratio of mid-cap mutual funds is lower than other actively managed mutual funds.
Easy Fund Withdrawal
Mid-cap mutual funds are often open-ended funds. This means you have the flexibility to buy or sell your investment anytime. So you can redeem your investments whenever needed. This is especially suitable for investors seeking short-term returns.
Portfolio Diversification
Mid-cap mutual funds invest in companies across various sectors. This provides two benefits. One, you can benefit from emerging trends and growth opportunities across different industries. Two, it reduces sector specific risks that can result in a downfall.
Expert Fund Managers
Professional fund managers handle your mutual fund investment portfolio. They conduct in-depth research and monitor performances to identify companies that have a higher growth potential.
Lower Investment Amount
Mid-cap mutual funds allow you to start investing with a smaller amount of funds, such as ₹500 or ₹1000. So, new or small investors who cannot afford a large initial investment can benefit from the high growth potential of mid-cap companies.
Different Modes of Investment
You can invest in mid-cap mutual funds through various modes, such as a lump sum or Systematic Investment Plan (SIP). With SIP, you can invest a fixed amount regularly to accumulate wealth gradually over time.
Wrapping Up
Mid-cap mutual funds offer a good balance between risk and return. So, if you are looking for higher growth potential with moderate risk, mid-cap mutual funds can be a smart choice. However, make sure you choose the right mutual fund option and stay invested for the long term. Analyse your risk tolerance level and future goals before exploring the different options. And seek expert guidance to determine the right strategy!
