Small and Mid Cap Mutual Funds

Small and Mid Cap Mutual Funds are classified on the basis of the market cap if they invest in a particular size of a company. Hence, Small and Mid Cap Mutual Funds are those funds which invest primarily in securities of Mid Cap and Small Cap companies. Simply put, these are the companies that rank after the top 100 companies in the country in terms of market capitalization.

These funds are highly sensitive to market fluctuations. They can deliver very good returns if the market is doing good and on the other hand, they can lose valuation very quickly if the market goes down.


Should You Invest in Small and Mid Cap Mutual Funds?

Here are the crucial factors that you should look into before making a decision to invest in Small and Mid Cap Mutual Funds:

  1. Performance potential: While making a selection, do not just rely on the recent performance of the funds, but analyse the long term returns about the funds. Research about the funds and compare the returns of the fund in various market conditions and if the fund has constantly performed well, then you may think about investing that fund.
  2. Decoding the risk factor: Mid cap funds and small cap funds are risky investment. They are extremely responsive to the market fluctuations and hence, can go up and down very easily. But, still some of these funds have generated very good risk adjusted returns in the past. So, such funds are worth considering while investing in mid and small cap funds.
  3. Choosing the right portfolio: The performance of small and mid cap funds depends entirely on the underlying strategies of investment. A few funds may invest a small amount in large-cap stocks to optimize performance, while a few others might focus completely on Midcap and small-cap stocks.
  4. Expertise of fund manager: Fund manager plays an important role in the performance of best mid cap funds and best small cap funds. The fund manager of such funds should have an extensive knowledge and expertise to look beyond the performance reports of the company and analyze other relevant factors such as management decisions, internal policies etc. before investing any particular company and helps you in a better tax savings mutual funds.

The term”Cap” is a commonly used for market capitalization in the area of mutual funds. The capitalization of a company defines the segment of the company placed like small cap mutual funds, mid cap mutual funds and large cap mutual funds.

The Bottom Line:

Investing in Small and Mid Cap Mutual Funds is quite beneficial to investors, given that you can work a good percentage, based on your risk-bearing ability.

To know more about midcap and small cap mutual funds, connect with a financial advisor @