Top Performing Mid Cap Mutual Funds to Invest in 2022
Mid cap funds primarily focus on companies that are in the medium range in terms of market capitalization. The stocks of such companies have the potential to generate higher returns than large-cap stocks; however, they are deemed riskier than large cap companies. Investors who wish to invest in the equity stock of the “companies of the future” can go for mid cap mutual fund schemes.
List of Top Performing Mid Cap Mutual Funds
Here is a list of the top performing mid cap funds that you can invest in:
|Name of the Fund||3-Year CAGR *|
|PGIM India Midcap Opportunities Fund – Direct Plan – Growth||44.10|
|Quant Mid Cap Fund – Direct Plan – Growth||41.68%|
|SBI Magnum Midcap Fund – Direct Plan – Growth||32.98%|
|Edelweiss Mid Cap Fund – Direct Plan – Growth||32.26%|
|Kotak Emerging Equity Fund – Direct Plan – Growth||30.62%|
|Motilal Oswal Midcap Fund – Direct Plan – Growth||31.31%|
|Nippon India Growth Fund – Direct Plan – Growth||29.59%|
|Baroda BNP Paribas Mid Cap Fund – Direct Plan – Growth||29.01|
|Invesco India Mid Cap Fund – Direct Plan – Growth||27.25%|
|HDFC Mid Cap Opportunities Fund – Direct Plan – Growth||27.77%|
*Note: Data valid as per the latest data on September 15, 2022.
What Are Mid Cap Mutual Funds?
As the name suggests, mid cap mutual fund schemes primarily invest (at least 65%) in stocks of mid-cap companies. These are the companies that rank 101st to 250th in terms of market capitalisation. The average market capitalisation of these companies ranges between Rs. 5000 to Rs. 20,000 crore.
How Do Mid Cap Mutual Funds Work?
The underlying assets of mid cap funds have the potential to generate higher returns than large cap mutual fund schemes and are less risky than small cap funds. Thus, mid cap funds primarily focus on the “middle-range” companies in the stock markets.
Mid cap companies are still in their developing stages and have the potential to turn into large-cap companies in the future. The fund managers of these schemes assess the growth potential of a mid-cap company before asset allocation.
However, as mid cap companies aren’t as well-established as large cap companies, the price of their stocks can get heavily affected during abrupt market fluctuations. Hence, investors are suggested to have patience and stay invested for long-term in these funds.
Who Should Invest in Mid Cap Mutual Funds?
The investors falling under any of the below mentioned categories can consider investing in mid cap mutual funds:
- Having long-term investment goals: Investors who have long-term investment goals might consider investing in mid cap funds. As most mid cap companies are currently in their growth phase, they have the potential to generate high returns in the near future. If you can be patient to reap the benefits of high returns from mid-cap funds, you can consider going ahead with the investment.
- Having higher risk tolerance: Although the chances of generating profitable returns from mid-cap funds are high, there’s also high risk associated with it. Firstly, not all mid cap companies grow to become large caps. In a tough market, the company might not be able to deliver on its return potential. Hence, investors with high-risk tolerance can consider investing in this category.
Benefits of Investing in Mid Cap Mutual Funds
Here are some of the benefits of mid cap mutual funds investment:
- Affordable: You can start investing in mid cap funds through minimum amounts of SIP investments, starting from Rs. 500. This makes investing in mid cap funds pocket-friendly.
- High liquidity: Mid cap funds do not have any lock-in period. You can buy and sell the units of these schemes at the prevailing net asset value (NAV). This makes these funds highly liquid in nature.
- Diversification: Mid cap funds invest in companies of almost every sector, such as health, agriculture, automobiles, finance, and many more. Hence, if you wish to diversify your portfolio, this fund can provide you with ample opportunities.
Things to Consider Before Investing in Mid Cap Mutual Funds
As an investor, you should consider the following factors before investing in mid-cap funds:
- Risk tolerance: When you are making an investment in any type of mutual fund, you are signing up for the risk associated with it; the risk level might vary, but it’s always there. They are very vulnerable to business cycles and hence have a higher risk than large cap mutual funds.
- Expense ratio: The fund houses or AMCs charge a fee for the operating expenses of a mutual fund, which is referred to as the expense ratio. Make sure to check the expense ratio of a mid-cap mutual fund because it will directly affect the profitability of your returns.
Taxation of Mid Cap Mutual Funds
As mid cap funds invest in equities of mid cap companies, they are taxed as per the taxation rules of an equity fund. Here are the tax implications on returns generated from mid-cap mutual funds:
|Capital Gains||Holding Period||Rate of Taxation|
|Short-term capital gain||Assets held for less than 12 months since purchase||Taxed at 15%|
Long-term capital gain
|Assets held for 12 months or more and gains are less than Rs. 1 lakh||Tax-exempt|
|Assets held for 12 months or more and gains exceed Rs. 1 lakh||Taxed at 10% without indexation benefits|
Mid cap funds can be the ideal investment option for investors who wish to invest in companies that have a high growth potential in the upcoming years. While they have good potential to earn significant returns in a favourable market scenario, they can also fumble in a non favourable scenario.
Investors should assess their risk tolerance level before going ahead with any investment decision.
FAQs about Mid Cap Mutual Funds
How are the dividends from mid cap funds taxed?
Dividends are taxed at the hands of the investors, and they are liable to pay them at the marginal tax rate. Dividends exceeding ₹5000 in one financial year are eligible for TDS.
How long should I stay invested in mid-cap mutual funds?
Mid cap mutual funds are equity-oriented funds. They invest in stocks of growing companies and hold the potential to generate higher returns for long-term investors. Thus, investors might need to stay invested for a long period to get desired returns on their investment.
Is there any exit load payable by the investors for mid-cap funds?
Yes, investors might need to pay the exit load for their mid-cap funds. However, this is applicable only when you are exiting the fund before one year and is limited to 1% of your investment.
What is the difference between large-cap and mid-cap funds?
Large-cap funds invest in stocks of large-cap companies. These are well-established companies with a market capitalisation of over Rs. 20,000 crore or more. They hold the first 100 positions in the stock exchanges in terms of market capitalisation.
On the other hand, mid-cap companies are listed 101st to 250th as per their market capitalisation. The market cap of these companies is between Rs. 5000 crore and Rs. 20,000 crore.
What are small-cap mutual funds?
Small-cap companies are listed above 250th on the stock exchange as per their market capitalisation. The funds that invest in such companies are highly volatile but have the potential to generate higher returns than mid and large-cap funds.