Jul 28, 2018 3 min read

What Can Mid Cap Mutual Funds Bring For You in the Upcoming Time?

Mid-cap funds are experiencing great correction now, but can we expect some bright days in future? Find out here!
Mid-cap mutual funds which were famous for their mind-blowing returns just before a few months from now have become a reason for discomfort among many investors during the present time. After a steep rally since 2016, the performance graph of the mid-cap funds has been falling for the past six months.

Besides, the annual average return of the category was at 0.76 percent, whereas the short-term gains are in negative. The experts at MySIPonline have shared their views on what you can expect from this category in the upcoming time. Let’s find out whether it is right for you or not.

Fall of Mid Caps: The Real Picture

When you invest in equity, you make peace with the fact that the journey of investment will not be a smooth ride and the volatility will be part and parcel. With equity investments, one cannot expect the graph to go up, always. There will be times of correction, and these are even stronger in the case of mid caps and small-cap funds. We, as market experts, always keep on telling our investors to invest in for a long-term horizon, and thus this clearly states that not all the years will be bright. If you do not have such a strong appetite to stomach in the risk, we would suggest you seek other options. However, if you can be a little patient now, we can assure that this mid-cap correction will be in your favor.

Is Re-categorization to be Blamed?

Well, not entirely! The valuations in mid-cap stocks looked steep right from the end of 2017. It will take some time for things to normalize as of now.

We do not deny that the universe for the mid-cap stocks has shrunk and due to the strict guidelines of SEBI, the portfolio of the mid-cap funds can now include only 150 stated stocks (101-250). Besides, around 65% of the investment of all the mid cap mutual funds will have to be in these 150 stocks, and the remaining can be in other segments. But even 150 is not a small number if the overall space is considered. Thus, it will not impose a significant problem in the future and should not be considered as the sole reason for the impacted performance of mid-cap schemes.

Or Does Bi-polarity of the Market Should be Pinned?

There is a popular term which is used in the context of the scheme these days, i.e., bipolarity. The experts at MySIPonline believe that this term goes better with large-cap schemes where there are some heavily-weighted stocks which have performed better than others. In the case of mid-caps, broad selling is only experienced these days. The fall is common for the entire segment. Some have fallen a little more, whereas there are others which have slipped a little less.

Experts’ Take on Long-Term Expectations from Mid-cap Mutual Funds

One can expect volatility in this segment, especially in the short-run now. With the rising crude oil prices, interest rates, and the schedule of an election year ahead with the earnings being up and down, the volatility is bound to occur. There is a possibility that the volatility here can be higher to some extent that what was seen in the past. Here, another important thing is that the mid-cap funds are known to offer high returns, especially in three-four years time horizon. So, one should avoid judging the scheme by its past three-four months performance. You can bet for long-term horizons, say for 5+ years, to invest in mid cap and small cap funds.

A Little Piece of Advice for All Our Mid-Cap Lovers

For all the investors who have invested in mid-cap funds via SIP mode, we would suggest them to continue with their investment. The coming time can be a little more volatile, but it’s your time to acquire the best benefits of a SIP investment through compounding and rupee-cost averaging. New investors who are willing to invest in this space can also take the route of SIP but should ask their respective financial advisor before making any decision. Furthermore, lumpsum investment in mid-cap funds should be avoided for some time now. For better assistance, you can take help from our experts at MySIPonline to seek guidance on this matter in a personalized manner.

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