There are more than 6000 companies listed on (BSE/NSE) in Indian stock exchanges. As the below chart shows how Mid-Cap/Small-Cap companies are classified
Below-251 (all companies)
Mid-Cap/ Small-Cap mutual funds has mandatory to invest 65% money into range of companies as it suggested in above chart. Companies which fall in Mid-Cap and Small-Cap are not constant by nature. An adjustment takes place on quarterly basis in that a few companies are excluded and a few companies are included in the category of each other due fall and rise in their shares prices.
Why one should invest in Mid-Small Cap mutual fund:-
Funds invests in business which are potentially growing, those companies have opportunity to scale up its business in new geography, can add product category horizontally & vertically and tap mass segment of indian consumer. So such companies may grow faster than normal rate of GDP rate in favourable economic conditions
Benefit of Mid-Small Cap Mutual Funds:-
It tends to deliver more return compared to large cap funds in longer duration
Funds are well diversified to capture different sectors & companies
Investing via mutual fund in mid-small company reduces risk of over leveraging single stock or sector
Mutual funds provide experts with research team to manage money
Investment through SIP in these funds mitigate timing of market
Higher alpha generation is possible to over all equity portfolio
Feature of Mid-Small Cap Fund:
Mid-Small cap funds are more volatile compared to large cap funds
Nature of these categories of fund is higher risk-higher return
A well diversified Mid-Small cap fund normally invest into 40 to 60 stocks
Funds allow facilities of SIP/STP/SWP to investors
High growth potential stocks are part of portfolio
Performance of Mid-Small Cap funds unpredictable in very short term
Investment will be well diversified in Equity & Debt Schemes, whereas Equity will give a push to appreciate capital and debt component will help downside in falling Equity Market.
Blend Portfolio of Equity & Debt
Risk adjusted return
Equity Exposure helps capital appreciation
Less Volatile compare to pure equity portfolio
Debt Part gives stability & fixed returns.
Medium term Goals for 5-7 Years like buying a car, vacation etc. can be planned with this approach.
Major portion of Investment will be in fixed income funds with little exposure to equity to generate Inflation adjusted Return.
Conservative approach has maximum part of portfolio into Fixed Income
Funds have tentatively 20% exposure in equity
1-3 % Higher returns compared to FD
Equity exposure in fund adds significant return in bull market
Fixed income provide stability & consistency to funds
Suitable time horizon for approach around 3-5 years and more