COVID-19 has made the markets volatile, and nobody knows when the market would get normal. People can still earn good money from the volatile market if they invest for long-term. One of the popular long-term mutual funds is the Mid Cap Fund. Let us bring to you the list of Best Mid Cap Fund to invest in 2020.
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What are Mid cap Funds?
Equity mutual funds that tend to invest at least 65% of the total money in mid cap companies are known as mid-cap funds. According to SEBI, all the companies ranked from 101st to 250th based on market capitalization are called mid cap companies. Their market capitalization lies between Rs. 500 Crores to Rs. 10,000 Crores.
Why invest in mid cap funds?
Mid cap companies are in the high-growth period, and they tend to be volatile on the stock market. But they have the potential to increase the earning growth and provide high returns to investors. Investors who want to earn higher returns and are willing to take the extra risk can choose these mid cap funds.
Things to consider before investing
In the long run, these companies have a more robust wealth bearing potential than large cap companies. They perform better when the markets are bullish and are less volatile than small-cap companies. These companies have more growth potential than other, more prominent companies. Mid cap companies respond to changing market conditions quickly. Due to their high growth potential, they tend to outperform the market and other large-cap and small-cap companies.
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Best mid cap funds in 2020
The table above shows that the mid cap funds have been providing very high returns in 3 months and have been providing high returns for more than one year. These funds’ expense ratio is also above 2%, which is very high and makes these funds even more expensive to buy.
Parameters for selecting a mid cap fund
While selecting a fund, an investor should take a good look at some quantitative and qualitative parameters. Some of these are –
- Reputation – An investor should look at the importance of the fund house, it can be seen either through the ratings given by the rating agencies and by looking at the AMC’s reputation.
- Past track record – An investor should look at the fund’s returns in the last few years. It is better to see returns for more than three years. Investors should also look at the performance of the fund manager in the past few years.
- Sound Investment Process – The process of investment should not be lengthy and should be easy to understand.
- Assets – A fund should have invested more than 50% of its money in mid-cap companies in the last year and should have net assets more than 100 crores.
- Costs – Costs like entry load, exit load, and the expense ratio should be low; otherwise, you will have to pay more to get the services.
Being emerging companies investing in mid cap companies can be very risky. Investors who are willing to take the high risk should only invest in these funds. Also, the investors who have an investment horizon for more than five years should invest in these funds as only in the long run these funds can derive maximum growth potential from the business cycle.