The Nifty Midcap 150 index has generated more than 117% returns over the past 2 years. That’s significantly higher than USA’s S&P MidCap 400 and UK’s FTSE 250 Index.
Mid-cap mutual funds invest in the same stocks from the Nifty Midcap 150 index that have outperformed foreign midcap indices. That said, the Indian mutual fund industry is diverse.
You’ll have to sift through hundreds of midcap funds before identifying what may be right for you. We’d like to make this task easier. That’s why we’ve compiled a list of the best mid cap mutual funds to invest in.
What Is A Mid-Cap Mutual Fund?
A mid-cap fund is an equity fund that primarily invests in mid-cap stocks. A mid-cap company generally has a market cap between ₹5,000 crores to ₹20,000 crores.
These companies rank between 101-250 in the Indian market and occupy a sweet spot between well-established large-cap businesses and emerging small-cap enterprises.
Famous Indian mid-cap companies include:
Bank of India
Thus, mid-cap stocks have the potential to generate better returns than their large-cap counterparts. At the same time, they are known to be less volatile than small-cap stocks.
Mid-cap mutual funds look to leverage this dual combination of potential returns and safety. But only a few manage to generate consistent returns over a long period of time.
Best Mid-Cap Mutual Funds In 2022
As an investor, you must go beyond star ratings to identify the right mid-cap funds for your financial goals. Because what’s best for others may not be right for you.
Cube’s advisor Wealth First makes it easy for busy professionals to access curated mid-cap funds. They analyze multiple qualitative and quantitative factors to handpick the best mid-cap funds.
We’re going to give you a sneak peek into the handpicked mid-cap funds.
1. Motilal Oswal Midcap 30 Fund
This top mid-cap fund was launched in 2014 and has an AUM of ₹2,751 crores. It can invest in a maximum of 30 stocks and currently has 25 stocks in its portfolio including Phoenix Mills, Gujarat Gas, and others.
Fund name: Motilal Oswal Midcap 30 Fund
AUM: ₹2,751 crores
3-year returns: 21.25%
5-year returns: 10.58%
Expense ratio: 2.03%
If you had invested ₹1,00,000 in this mid-cap fund, you would have a profit of ₹77,156 after 3 years and ₹68,505 in 5 years based on the historical data mentioned above. Calculate your returns here.
Top 5 Holdings
Tube Investments Of India
CG Power & Industrial Solutions
Max Financial Services
2. PGIM India Midcap Opportunities Fund
This mid-cap fund was launched in 2013 and manages assets worth ₹5,012 crores. The fund has 51 stocks in its portfolio including the likes of Dalmia Bharat, TVS Motor Company, and others.
Fund name: PGIM India Midcap Opportunities Fund
AUM: ₹5,012 crores
3-year returns: 31.50%
5-year returns: 15.00%
Expense ratio: 2.00%
If you had invested ₹1,00,000 in this mid-cap fund, you would have a profit of ₹1,24,809 after 3 years and ₹1,01,135 in 5 years based on the historical data mentioned above. Calculate your returns here.
Top 5 Holdings
TVS Motor Company
3. Sundaram Large And Mid Cap Fund
This is one of the top large and mid cap funds that has been on the market for 15 years. It manages ₹4,944 crores in assets and holds 73 stocks like Astral, ICICI Bank, and more.
Fund name: Sundaram Large And Mid Cap Fund
AUM: ₹4,944 crores
3-year returns: 15.60%
5-year returns: 10.08%
Expense ratio: 1.86%
If you had invested ₹1,00,000 in this large and mid-cap fund, you would have a profit of ₹56,089 after 3 years and ₹61,051 in 5 years based on the historical data mentioned above. Calculate your returns here.
Top 5 Holdings
Larsen & Toubro
4. Kotak Emerging Equity Fund
This is the final entry to our list of best mid-cap funds to invest in. It was launched in 2007 and manages ₹19,303 crores. Its portfolio includes 70 stocks with the likes of Thermax, Schaeffler India, and more.
Fund name: Kotak Emerging Equity Fund
AUM: ₹19,303 crores
3-year returns: 21.98%
5-year returns: 12.54%
Expense ratio: 1.80%
If you had invested ₹1,00,000 in this mid-cap fund, you would have a profit of ₹81,584 after 3 years and ₹84,243 in 5 years based on the historical data mentioned above. Calculate your returns here.
Top 5 Holdings
Reasons To Invest In Mid-Cap Funds?
1. Potentially High Returns
Top mid-cap funds are known to generate better returns than large-cap funds. The reason is the potential for growth that mid-cap stocks have. They’re relatively well-known companies but not industry leaders.
This allows them to be aggressive and make fluid business decisions to generate relatively high returns. Furthermore, mid-cap companies have the potential to become large-caps in the future.
2. Relative Stability
While mid-cap funds may not be as stable as large-cap funds, they have the edge over their small-cap counterparts. Mid-cap companies have access to more capital than small-caps.
Their market cap is significantly higher as well. That’s why the best mid-cap mutual funds are known to provide better stability than small-cap funds.
A mid-cap fund doesn’t give you access to a single stock. Rather, it gives you access to a basket of mid-cap stocks along with other assets in lesser proportion.
What this means is that you don’t have to pore over charts and wreck your brains over mid-cap stocks. A professional would do that for you. But does this mean you should pick mid-cap funds on your own?
Watch this video to know more.
Risk Involved In Mid-Cap Mutual Fund Investments
1. Over/Under Diversification
Contrary to popular belief, you may not need to own multiple mid-cap funds to achieve your financial goals. Rather, a handful of the best mid-cap funds can help you create solid wealth over the long term.
Most mutual fund investors land up in one of two scenarios:
Invest in too many mutual funds with overlapping portfolios
Invest in too many mutual funds, over diversifying, and incurring a higher investment cost
Instead, it’s optimal to consult a trained financial professional who can help you invest in the best mid-cap funds based on your financial goals and risk profile.
2. High Volatility
Most stocks are prone to volatility while some are more volatile than others. This is true for mid-cap stocks, especially when compared to large-cap stocks.
Mid-cap companies aren’t large enough to smoothly handle unfavourable market conditions. That’s represented by their stock and the mid-cap mutual funds that invest in it experience the brunt of it too.
3. High Investment Cost
Equity funds are generally known to carry a higher investment cost. That’s because of the management fees charged by AMCs for handling the day to day business of the fund.
Investors must thus pay attention to the number of mid-cap funds, and on a broader level, the number of equity funds they hold. You can read more about this here.
Taxability Of Mid-Cap Mutual Funds
Mid-cap mutual funds carry a Short Term Capital Gains (STCG) tax and a Long Term Capital Gains (LTCG) tax. You’ll have to pay a flat tax of 15% on STCG if you hold the mid-cap fund for less than a year.
You’ll have to pay a flat tax of 10% on LTCG if you hold the mid-cap fund for more than a year. However, LTCG of up to ₹1,00,000 is tax-free. Read more about saving tax here.
Things To Consider Before Investing In Mid-Cap Mutual Funds
1. Your Risk Appetite
Mid-cap funds are volatile and may not be suitable for every investor’s risk profile. Considering mid-cap funds fall under the aggressive category, it’s best to understand your risk profile first before investing.
The best way to get an idea of your risk profile is to:
Investing is all about achieving goals that range from the short term to the long term. Similarly, you must analyze financial goals to see whether mid-cap funds can help you achieve them.
For example, equity funds like mid-cap funds are suitable for the long term (5+ years). So the question is, do you have long term goals? For more information on defining investment goals, read this.
3. Quality & Track Record
Considering there are hundreds of mid-cap funds and thousands of mutual funds in the market, it’s important to understand that not all funds will be good or bad.
Evaluating each fund on multiple criteria is necessary to ensure that you choose the right ones. This means going beyond a mid-cap fund’s star ratings and into details like the track record, turnover, and more.
Doing this may be difficult for working professionals. That’s why you could benefit from a service like Cube that gives you access to mid-cap funds that can work for you. Download Cube To Know More.
Note: Facts & figures are true as of 23-05-2022. None of the information shared here is to be construed as investment advice. Exercise caution when investing in assets like stocks, mutual funds, alternative investments, and others.
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