What does Mid-Small Cap means:-
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
| Companies |
Category |
| 1-100 |
Large-Cap |
| 101-250 |
Mid-Cap |
Below-251
(all companies) |
Small-Cap
|
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
