Top 5 midcap funds to invest in August 2024

Mid-cap funds are gaining attraction among investors seeking a balance between risk and reward. These funds invest in mid-sized companies with growth potential, offering a sweet spot between stability and high returns. In 2024, several mid-cap funds stand out for their performance and potential. This article will explore what mid-cap funds are, who should invest in them, and highlight the best mid-cap funds available this year.

What is a Mid-cap Mutual Fund?

Mid-cap refers to companies with a market capitalization (market cap) that falls between large-cap and small-cap companies. Market capitalization is calculated by multiplying the company's stock price by the total number of its outstanding shares.

Mid-cap companies usually have market capitalizations ranging from ₹5,000 crores to ₹20,000 crores. This range signifies a balance between the stability of large caps and the high growth potential of small caps.

Who Should Invest in Mid Cap Funds?

1.Who prefer a mix of safe and risky choices.

Mid cap funds are suited for investors who can handle moderate risk and are looking for growth opportunities. They are ideal for those with a medium to long-term investment horizon and a tolerance for market fluctuations.

2. Safe Investment Goals and Risk Tolerance

Investors aiming for capital appreciation and willing to endure short-term volatility should consider mid cap funds. They are suitable for those looking to diversify their portfolios with a mix of growth and stability.

3.Want to begin with small amount.

Investments in the mid cap funds can be started with a small amount. These investments can start as small as Rs. 500.

Popular Mid Cap Mutual Funds in India (2024) 

  Note: Returns are annualized and based on the most recent data available as of August 2024. Minimum investment amounts are subject to change and may vary by distributor.

Importance of Investing in Mid Cap Funds

1.Growth Potential

Mid cap funds invest in companies with significant growth potential. As these companies expand and capture larger market shares, investors can benefit from substantial capital appreciation.

2. Diversification Benefits

Including mid cap funds in your portfolio adds diversification. This can help spread risk across different sectors and company sizes, reducing overall portfolio volatility.

3.Historical Performance

Historically, mid cap funds have delivered impressive returns compared to large cap funds, particularly during bullish market phases. They also offer resilience during market corrections.

Factors to Keep in Mind While Investing in Mid Cap Funds

1.Performance History

Review the historical performance of mid cap funds to measure their consistency and ability to deliver returns across market cycles.

2.Expense Ratios

Consider the expense ratios of funds, as higher expenses can erode overall returns. Opt for funds with lower expense ratios to maximize gains.

3.Fund Manager’s Track Record

The experience and track record of the fund manager are crucial. A skilled manager can significantly influence the fund's performance and success.

4.Investment Horizon and Goals

Ensure the fund aligns with your investment horizon and financial goals. Mid cap funds are generally suited for long-term investments due to their growth potential and volatility.

Pros and Cons of Mid Cap Funds

Pros

• High Growth Potential: Mid cap funds invest in growth-oriented companies, offering higher return possibilities.
• Balanced Risk and Return: They provide a balance between the stability of large caps and the high-risk, high-reward nature of small caps.
• Diversification: Adding mid cap funds to your portfolio helps spread risk and enhance overall returns.

Cons

• Higher Volatility: Mid cap funds are more volatile than large cap funds, which can lead to greater short-term fluctuations in value.
• Risk of Lower Liquidity: Some mid cap stocks may have lower liquidity, impacting ease of buying or selling shares.
• Short-Term Market Fluctuations: Mid cap funds can be affected by short-term market fluctuations, which may impact their performance.

SIP Calculator

How to Use an SIP Calculator

An SIP (Systematic Investment Plan) calculator helps you estimate the future value of your investments based on your regular contributions, investment duration, and expected returns. To use an SIP calculator, input details such as the amount invested monthly, the investment period, and the expected annual return rate.

Taxation

Short Term Capital Gain Tax (STCG):

If you sell your investments within 1 year, the gains are classified as Short Term Capital Gain (STCG) and you need to pay 15% tax on them.

Long Term Capital Gain Tax (LTCG):

Whereas any mid cap investment held for more than one year, the gains are classified as Long Term Capital Gain (LTCG). Gains of up to 1 lakh in a financial year are tax-free. Beyond 1 lakh, the gains are taxed at a rate of 10%.

Tax Benefits under Section 80C

Investment in mid cap funds does not qualify for tax benefits under Section 80C. However, investing through Equity Linked Savings Schemes (ELSS) can provide tax deductions under this section.

Frequently Asked Questions

1. Are mid cap mutual funds safe investments in 2024?

Mid-cap mutual funds can offer a good balance between risk and return, with potential for growth. However, they carry more risk than large-cap funds, especially in volatile markets. Research the fund's history and current market trends. Consulting a financial advisor can help align these investments with your goals.

2. How do mid cap mutual funds compare to large-cap and small-cap funds in 2024?

In 2024, mid cap funds strike a balance between stability and growth. Large-cap funds are more stable with lower risk but slower growth, while small-cap funds offer high growth potential but with higher volatility. Mid cap funds provide a middle ground, combining moderate risk with significant growth opportunities.

3. Can mid cap mutual funds help in long-term wealth creation in 2024?

Yes, mid cap mutual funds can be effective for long-term wealth creation in 2024. They invest in companies with substantial growth potential, which can lead to significant capital appreciation over time. Their performance is often stronger during bull markets, making them suitable for long-term investment strategies.

4. Which mid cap funds have the lowest fees in 2024?

In 2024, some mid cap funds with lower fees include:

• Axis Mid Cap Fund: Known for its competitive expense ratio.
• HDFC Mid-Cap Opportunities Fund: Offers relatively lower management fees. These funds help maximize returns by minimizing costs.

5. How do mid cap mutual funds perform during market downturns in 2024?

During market downturns in 2024, mid cap mutual funds may experience higher volatility compared to large-cap funds. They can face sharper declines due to their growth-oriented nature and smaller market capitalization. However, they also have the potential for strong recoveries when the market rebounds.

Get a Personal Loan that fits your needs. Apply for loans from Rs 1000 to Rs 15 Lakhs with competitive rates. 

Check Your Eligibility Now 

Find the Perfect Credit Card for your spending habits. Explore top credit cards and maximize your rewards. 

See your matches. 

Author - Shruti Mugdiya

Shruti Mugdiya, an insightful blog writer and finance enthusiast graduated MBA in International Business. With a strong foundation in financial principles and a keen understanding of global markets. She tend to bring expert knowledge to writing. Her passion for finance and commitment to delivering valuable content helps readers navigate complex financial topics with ease. Whether you're looking to enhance your investment strategy or stay updated on financial trends, Shruti’s expertise offers a clear and engaging perspective.