Mid Cap Mutual Funds

Are you an investor looking for a mutual fund that offers a balance between growth and risk? Mid Cap mutual funds can be a right fit. The fund manager of these mutual funds invest in companies that are still growing and have potential to become a large business in the near future. If you are an investor who wants to invest for the first time or looking forward to diversifying your portfolio, then the Mid Cap Mutual Fund can be a right choice for you.

What are Mid Cap Mutual Funds?

Mid cap mutual funds are the type of equity mutual funds which make investments in mid cap companies. As per SEBI guidelines, mid cap companies are those ranking between 101 to 250 top companies based on market capitalisation.

Mid cap companies are generally well-established but still have significant room for expansion. As they continue to grow, their share prices may increase over time, allowing investors to benefit from their growth. Since the mutual funds invest in the companies that are still growing, they come with higher risks compared to large cap mutual funds.

Features of Mid Cap Mutual Funds

• Focus on Growth Oriented Companies: Mid cap mutual funds mostly focus on companies which already have established themselves and are aiming to expand their operations. In general, mid-cap companies have higher chances of growth compared to large cap companies.
• Greater Chances of Making Profits: As mid-size companies grow, their profits will also go up and their value will grow considerably. As a result, there will be higher chances of achieving higher returns in the future.
• Moderate to High Risk: As mid-cap companies are more susceptible to the changes in the market environment, mid cap mutual funds may experience larger fluctuations in the prices of their investments.
• Diverse Portfolio: In contrast to investments in individual companies, the investment portfolio of mid cap mutual funds is more diversified because it includes various companies and industries.

How to Invest in Mid Cap Mutual Funds?

You can invest in mid cap mutual funds by following simple process:

Step 1: Choose investment mode. You can invest through:

• AMC websites
• Online investment platforms provided by stockbrokers
• Mutual fund distributors

Step 2: Choose a suitable mid cap mutual fund.

Step 3: Choose between Systematic Investment Plan (SIP) and Lump sum based on your goal and make investment.

Step 4: Make payment through UPI, netbanking or other available methods.

Why to Invest in Mid Cap Mutual Funds?

• Strong Long-Term Growth Potential: Medium-sized companies have higher growth potential compared to leading market players. Investment in the early stages of these companies can generate attractive returns.
• Opportunity to Benefit from Emerging Businesses: Many successful large companies were once mid-cap companies. Investing in quality businesses during their growth phase can provide rewarding long-term returns.
• Diversification: Adding Mid Cap Mutual Funds to your portfolio helps diversify your investments beyond large-cap stocks and other asset classes.
• Ideal for Long-Term Investors: Investors with long-term financial goals such as retirement planning, children's education, or wealth creation may benefit from the growth potential of mid-cap companies.
• Professional Expertise: You do not need to research individual stocks yourself. Professional fund managers identify promising companies and actively manage the portfolio on your behalf.

Taxation Rules for Mid Cap Mutual Funds

Mid cap mutual funds fall into the equity mutual funds category and are taxed like other equity mutual funds.

• Short-Term Capital Gains (STCG): If units of mid cap funds are sold within 12 months from the date of purchase, the profits will be considered STCG, which shall be taxed at 20%, with applicable surcharge and cess.
• Long-Term Capital Gains (LTCG): Profits made from selling units after 12 months will be considered LTCG. Profits made from mid cap funds beyond ₹1.25 lakh in a fiscal year will be taxed at 12.5%, whereas LTCG up to ₹1.25 lakh is tax-exempt.

Tax laws may change from time to time, so it is advisable to check the latest tax provisions or consult a tax professional before making investment decisions.