Mid Cap Mutual Funds to Buy in December 2021
What are Midcap Mutual Funds?
Midcap funds are equity-oriented mutual funds that are required to invest at least 65 per cent of their assets in the equity and equity-related securities of midcap businesses with market capitalizations ranging from 101 to 250 billion dollars.
Midcap firms have the potential to grow into tomorrow’s large caps, giving midcap funds more upside potential and the capacity to generate significant value for their owners. During bull market periods, these funds tend to outperform large-cap funds.
Midcap funds, on the other hand, are less resilient during bad markets and may fall more than large-cap funds. Keep in mind that midcap companies operate on a smaller scale than their larger counterparts, have fewer customers, and have limited access to numerous resources. Due to these factors, they are subject to risk during periods of low market activity.
This makes midcap funds a high-risk, high-reward investing option. Midcap funds are located between smallcap and thematic/sectoral funds on the risk-return continuum. If you have a high-risk appetite, the ability to withstand short-term volatility, and an investment time horizon of at least 5-7 years, a midcap fund can be a good fit for your core portfolio.
The long-term returns of funds in the midcap category are generally positive. In recent years, most midcap funds have outperformed their peers. This has aided in the improvement of the funds’ long-term performance. When investing in midcap funds, however, it is critical to look beyond returns and select funds that participate in savvy stock choice and cautious risk management.
Top midcap mutual funds to buy in December 2021.
Axis Midcap Fund, DSP Midcap Fund, and Invesco India Midcap Fund are currently the best midcap fund schemes, according to analysis and research. By avoiding momentum bets and focusing on fundamentally sound high-growth potential midcap businesses, these funds have rewarded investors handsomely for their risk.
There are a few other good performers in the category:
- Edelweiss Midcap Fund
- Kotak Emerging Equity Fund
- HDFC Midcap Opportunities Fund
- L&T Midcap Fund
|Scheme Name||Absolute (%)|
|Axis Midcap Fund||33.95|
|Kotak Emerging Equity Fund||29.80|
|DSP Midcap Fund||30.30|
|Invesco India Midcap Fund||33.44|
|Edelweiss Mid Cap Fund||38.19|
|PGIM India Midcap Opp Fund||61.49|
|Nippon India Growth Fund||31.44|
|HDFC Mid-Cap Opportunities Fund||28.88|
|L&T Midcap Fund||24.89|
|Franklin India Prima Fund||25.26|
How to select the best midcap mutual funds to buy in December 2021?
Examine whether the fund has consistently outperformed the benchmark and category peers during several market cycles (bull and bear market stages). While all funds may perform well during bull markets, one of the most essential factors to consider when choosing a midcap fund is its capacity to manage downside risk during bear markets.
Then, over three years, use risk-reward ratios like Sharpe Ratio, Sortino Ratio, and Standard Deviation to see if the fund has compensated its investors effectively for the risk they’ve taken.
When shortlisting funds for your portfolio, give preference to those that perform well on risk-reward metrics.
Qualitative characteristics are frequently disregarded, despite their importance in the selection process. It entails determining the portfolio’s quality as well as the fund manager’s/efficiency. house’s
The fund company should have a strong track record of success and adhere to sound investment practices with suitable risk management measures.
Check the fund manager’s qualifications and experience, as well as the track record of the other schemes they handle, because the fund’s performance is directly dependent on his or her skills.
Examine the fund’s portfolio to see how effectively it is diversified across equities and industries. Keep in mind that a concentrated portfolio puts you, the investor, at greater risk. To assist it to sail through bad market conditions, make sure the plan includes highly liquid, quality names of midcap companies.
Keep an eye on the churning rate of the securities in the portfolio as well, as a high churning rate can make the portfolio more volatile and have a negative impact on the scheme’s total performance. Examine the portfolio turnover ratio and expense ratio to see how well the fund manages to churn and keeps costs low.
Yes, we realise that the above list is a lot to take in for the average investor. It necessitates number crunching, and most of the information is not immediately accessible in one location. However, if you do need to narrow down the best funds, these considerations are critical.
Even though midcap funds may outperform large-cap funds, you should not expand your exposure to the category without first assessing your portfolio and financial needs. Stick to your customized asset allocation plan based on your financial objectives, risk tolerance, and investing horizon to avoid taking unnecessary risks.
Disclaimer: This article is based on the research of the Author. Please do your research before investing. We take no responsibility for any loss suffered by the investor due to this information.