SmartTrade Way

INTRODUCTION

Small and Mid Cap Funds

Mid-Cap Funds

Mid-Cap Funds are funds that invest in companies with market capitalization between Rs 5000 crore and Rs 20,000 crore. As they are growing companies, they have the potential to give returns much higher than large caps.

Investment in mid-cap funds are suitable for investors who are ready to face the volatility of these funds, as mid-cap companies show more ups and downs than the large cap companies. Thus, investors ready to take some risks should only consider investing in these funds.

Features of Mid-Cap Funds

● They outperform the broader market in bullish conditions but significantly underperform in bearish conditions.
● They are less risky than small cap funds and riskier than large cap funds.
● Investing in midcap funds should be considered only by investors willing to be invested for the long term, more than 5 years.
● Mid-Cap funds are suitable for young investors as they can stay invested for the long term but not for investors close to retirement.
● These funds are good for achieving long term financial goals like planning for a child’s education or buying a house.

Small Cap Funds

● Small Cap Mutual Funds invest in companies whose market capitalization is from Rs 10 crore and Rs 500 crore.
● They have much higher risk than mid-cap mutual funds as they are even more volatile than mid-cap mutual funds.
● In a bullish market and in the long term, they can generate phenomenal returns.
● But on the flip side, they lose value much more quickly than mid-cap mutual funds in poor market conditions. They may also underperform if the companies in small cap fund mutual funds fail to perform to their potential.
● Investments in these funds can be considered by investing through SIPs (Systematic Investment Plans).
● As is in Mid-Cap Funds, it is suitable for young investors and for achieving long term financial goals.
● While investing in Small Cap Funds, funds which have a diversified portfolio across sectors should be invested in. Funds which have a limited number of stocks should be avoided as the risks are higher.
● Small Cap Mutual Funds of Fund Houses with a long track record of giving above average returns to the small cap mutual fund segment should only be considered for investments.
● Small Cap Mutual Funds with a Price Earnings Ratio (P/E) in excess of 30 should be avoided as it means that you are overpaying for the growth potential of the companies in the scheme.

SBI MAGNUM MULTICAP FUND

● This fund since inception, has given returns of 16.59 percent.
● It was launched on March 29, 2005.
● It had a corpus of Rs 6831 crore as on 31st March 2022.
● Its benchmark index is the Nifty Midcap 150.
● It has been managed by the same fund manager since July 2010.
● It invests more than 65 percent in midcap stocks and the balance in other large cap and small caps and other debt and money market instruments.
● Its NAV as on 26th April 2022 was Rs 57.

Long term investors can consider investment in this sbi mid cap fund as it has a long stable record with excellent returns.

SUNDARAM MIDCAP FUND

The fund is managed by Sundaram Asset Management Company, which is a wholly owned subsidiary of one of India’s most respected non banking finance companies, Sundaram Finance Limited,

● This is an open-ended scheme which predominantly invests in mid-cap stocks with high growth prospects.
● It is suitable for investors looking for capital appreciation, and it invests in diversified mid-cap stocks.
● Its NAV as on 26th April 2022 was Rs 746.
● Since inception in July 2002 has given compounded annual growth returns of 24 percent and 21 percent in the last one year.
● Its benchmark index is the Nifty Mid-Cap 150 Index.

Investment in Sundaram Mid Cap Fund should be considered for the long term by investors with an appetite for risk, considering its past outstanding record and the bright prospects of the Indian Economy.

CONCLUSION

Investment in mid-cap and small cap mutual funds come with more than a share of high risk, but they can also give phenomenal returns. So investments should be made with funds with good management and strong past history like SBI Magnum Multicap Fund and Sundaram Midcap Fund.