Mid-cap mutual funds represent a dynamic investment avenue, offering a compelling blend of growth potential and moderate risk. What makes mid-cap funds particularly appealing is their ability to deliver higher returns than large-cap funds while maintaining less volatility than small-cap counterparts.
Whether balancing between risk and reward or aiming to diversify your portfolio with high-growth potential, mid-cap mutual funds offer a strategic pathway to achieving your financial aspirations. In this blog, we will discuss mid-cap mutual funds including a list of top mid-cap funds and insightful information.
What Do Mid-Cap Mutual Funds Mean?
Mid-cap funds definition are a type of equity mutual funds that invest people’s money in medium-sized companies. These funds invest a minimum of 65% of assets in the shares of mid-cap companies.
As per the Securities and Exchange Board of India (SEBI), mid-cap companies rank from 101 to 250th position by market capitalisation on the stock exchanges. As these companies come between large-cap and small-cap companies, they involve mild risks and benefits. In short, they offer a perfect balance between risk and return.
Elements of Mid-Cap Funds
These funds have a unique set of features that provide investors with a balanced risk and profitability index. Here are a few elements of a mid-cap fund that you must know after understanding what is a mid-cap mutual fund:
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Long-Term Investments
Market conditions have a significant impact on mid-cap companies. Consequently, a company experiencing a decline in value due to natural market fluctuations is likely to rebound over time if investors remain patient and committed to a longer investment horizon.
Mid-cap funds are ideally suited for an investment strategy spanning 7 to 8 years, during which investors can potentially reap substantial gains from their transition to large-cap companies.
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Balanced Investment
Understanding what is a mid-cap fund reveals its unique hybrid characteristics, combining elements of both large-cap and small-cap funds. It offers the potential for higher returns compared to large-cap investments while providing more stability than small-cap options. This makes them an excellent choice for investors uncertain about their financial goals and risk tolerance.
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Risk Factor
Mid-cap investments cater to individuals with a moderate risk appetite. While they carry more risk than large-cap funds, they are generally more stable than small-cap investments. Investors can mitigate some of these risks by carefully selecting their fund managers based on strategic and statistical insights.
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Suitability
Thanks to their balanced nature, mid-cap funds have gained popularity and are suitable for various investors. They present a balanced risk profile that remains high enough for individuals approaching retirement age. These funds are particularly appealing for younger to middle-aged investors due to their strong compounding potential, allowing time for these investments to lead to impressive returns.
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Expert Fund Management
Professional fund managers oversee the allocation of your funds across various growing mid-cap companies. They strive to make profitable investment decisions while considering the associated risks. To select the right fund manager, it is essential to analyse the fund house’s past performance and how effectively they have navigated market fluctuations.
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Expense Ratio
All fund houses impose basic fees for their investment services. The Securities and Exchange Board of India (SEBI) has established a maximum administration cost threshold of 2.5%. However, expense ratios can vary among different fund houses, so choose a fund with reasonable administration costs to maximise profitability.
List of Top 7 Mid-Cap Mutual Funds to Invest
Here is a list of the top 7 mid-cap mutual funds as of 18th March 2025:
- Motilal Oswal Midcap Fund-Direct Plan-Growth: Currently, this mid-cap fund manages ₹23703.68 crore of total funds and offers a yearly return of 18.49%.
- Invesco India Mid Cap Fund-Direct Plan-Growth: This mutual fund has a total AUM of ₹5,246 crore and offers a yearly return of 18.14%.
- Edelweiss Mid Cap Fund-Direct Plan-Growth: Currently, this mid-cap fund manages ₹7,729.29 crore of total funds and offers a yearly return of 15.28%.
- LIC MF Midcap Fund-Direct Plan-Growth: This mutual fund has a total AUM of ₹276.69 crore and offers a yearly return of 13.80%.
- Franklin India Prima Fund-Direct-Growth: This fund manages ₹10,594.08 Cr of investors’ assets and offers a yearly return of 13.63%.
- WhiteOak Capital Mid Cap Fund-Direct Plan-Growth: This mutual fund has a total AUM of ₹2,502.58 crore and offers a yearly return of 13.05%.
- JM Midcap Fund-Direct Plan-Growth: Currently, this mid-cap fund manages ₹1,198.23 crore of total funds and offers a yearly return of 12.82%.
Advantages of Investing in Mid-Cap Funds
Here are some key benefits of investing in mid-cap mutual funds in India:
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High Growth Potential
Mid-cap funds focus on companies that are actively competing within the mid-market segment. These mid-cap businesses are in their growth phase, with significant potential to expand rapidly. This accelerated growth presents an excellent opportunity for investors seeking high returns by tapping into their upward trajectory.
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Comparatively Less Volatile
While mid-cap funds exhibit greater volatility than large-cap funds, they are far more stable compared to small-cap funds. This balance ensures a moderate risk level while offering attractive returns, making them a suitable choice for investors looking for a mix of stability and growth.
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Diversification in Investment
The lower valuation per share of mid-cap companies allows fund managers to diversify investments across multiple businesses. This diversification reduces risk and enhances portfolio stability, ensuring that even if one company underperforms, the overall impact on the fund remains limited.
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Liquidity
Investments in mid-cap funds come with high liquidity, allowing investors to withdraw their money whenever needed. However, withdrawing funds within the first year may incur additional costs, such as exit loads, which investors should consider before redeeming their investments prematurely.
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High Affordability
Mid-cap fund investments are highly affordable due to their relatively low per-share cost. Investors can start a Systematic Investment Plan (SIP) with as little as ₹100 or make a lump sum investment starting at ₹5,000. However, the amount differs from one mutual fund to another. This affordability makes mid-cap mutual funds accessible to individuals with varying budgets, enabling them to build wealth over time.
Steps to Invest in Mid-Cap Mutual Funds
One can invest in mid-cap mutual funds by directly contacting the issuing company or through an investment platform like Torus Digital. Here are a few steps to invest in mutual funds through Torus Digital.
- Download the Torus Digital application through the Play Store or App Store.
- Create a Demat account by fulfilling the KYC process.
- Once your account is created, you can choose the best mid-cap fund to invest in by analysing past performance, the expertise of fund managers, NAV and more.
- After selecting the fund, you can choose from the SIP or lumpsum payment method.
- You can add transfer funds from your bank account to the Demat account to invest in the fund.
- Once the payment is done, the units will be allocated to you in accordance with the fund’s NAV.
What is the Best Time to Invest in Mid-Cap Funds?
The best time to invest in mutual funds depends on your investment goals and risk adherence. You have to identify favourable market conditions before investing in mutual funds. Moreover, you must analyse the benchmark indexes to get an idea of current market behaviour.
Once you have an idea of generic market conditions, you must delve deeper into mid-cap companies, their current growth prospects and challenges. In addition, the profitability of a fund with lesser volatility in fluctuation is the ideal time for investment in mid-cap companies.
Final Thoughts
Mid-cap funds have features of both large and small-cap funds. They provide highly acceptable returns in return for a balanced risk undertaking. These funds are ideal for long-term investors. However, you must consider all the factors in that fund including the expense ratio, exit load, etc., before investing in a mid-cap mutual fund.
Do you want to invest in midcap mutual funds? Well, Torus Digital is the right platform for it. We offer streamlined Demat account creation services and an easy interface for investors to analyse and invest in mutual funds. So, start your investment journey today!
