Rahul is a 26-year-old IT professional who recently started thinking seriously about investing to grow his wealth. He wanted his money to grow but was worried about taking risks. He had heard stories of people earning big profits from stocks, but he also knew of others losing money when the market fell. Rahul wanted a way to invest money that could give good returns without too much worry. So, he went to a mutual fund advisor in Vijayawada for guidance and learned about midcap funds.
First the mutual fund advisor explained the idea of diversification. Diversification means spreading your money across different types of investments instead of putting everything in one place. By doing this, if one investment goes down, others may still do well. This helps reduce the risk and makes it easier to achieve steady returns. One important part of a diversified portfolio is a midcap fund, which offers a mix of growth potential and moderate risk.
What Are Midcap Funds?
To understand midcap funds, it is important to know about market capitalization. Market capitalization is the total value of a company’s shares. In India, companies ranked 101st to 250th in size are called midcap companies.
A midcap mutual fund invests in these medium-sized companies. They are larger than small companies but smaller than big ones. Midcap funds can give higher returns than large-cap funds in the long run, but they also carry higher risk. This makes them an important part of a well-planned portfolio for investors who want growth but can handle some ups and downs.
Midcap companies are often growing fast day by day. They may expand into new markets, create new products, or improve efficiency to earn more. At the same time, they are also likely to be affected by economic changes or new government rules. That is why investing in midcap funds requires careful planning and monitoring, and a mutual fund advisor is of help here.
Why Include Midcap Funds in Your Portfolio
The biggest advantage of midcap funds is its growth potential. Since these companies are in the growth stage, their stock prices can rise faster compared to large companies.
However, midcap funds are also more volatile. This means their value can move up and down more than large-cap funds. By including midcap funds along with large-cap, small-cap, and debt investments, investors can balance risk and profitable rewards.
Midcap funds usually perform well during periods of market growth. During slow economic times, they may fall more than large-cap stocks. This is why it is important to have a long-term plan and stay patient when investing in midcap funds.
The Amount to Invest in Mid-Cap Funds
The amount you invest in midcap funds depends largely on how much risk you are willing to take and your investment horizon.
- Conservative investors: Allocate around 10–15% of your portfolio to midcap funds, while placing greater focus on large-cap funds and safer instruments such as debt.
- Balanced investors: Consider investing about 20–30% in midcap funds, alongside large-cap and multi-cap funds. This allows for steady growth while maintaining a reasonable level of risk.
- Aggressive investors: Comfortable with market fluctuations may allocate up to 40% of their portfolio to mid-cap funds to tap into higher growth potential.
It is also important to review your portfolio regularly. Over time, some midcap companies may grow and enter the large-cap category. Regular rebalancing helps ensure that your investments continue to align with your financial goals and risk level.
Best Ways to Invest
- Use SIPs: Systematic Investment Plans help maintain discipline by making you invest regularly and reduce the impact of market ups and downs.
- Plan with a SIP calculator: Using one helps estimate how much you can earn over time. You can use a SIP calculator from the ProfitsZone official app.
- Stay invested for long-term success: Mid-cap funds usually give better returns over a period of 5–10 years.
- Review and adjust your portfolio: Make sure your fund allocation matches your goals and risk level. Let a mutual fund advisor take a look at it.
- Choose funds wisely: Look at performance history, expense ratios, and fund manager experience before selecting a fund.
Conclusion
Midcap funds are an important part of a balanced investment portfolio. They offer higher growth potential than large-cap funds but have moderate risk. By investing through SIPs, maintaining a long-term plan, and reviewing the portfolio regularly, investors can benefit from midcap funds while reducing risks. Including midcap funds in the right proportion based on your risk tolerance can help you build a strong and resilient portfolio for long-term wealth creation.