When building a portfolio of equity funds, the size of a company is crucial. There are six categories based on market capitalization, and today, we’ll focus on an essential one—mid-cap equity funds.
These equity MF invest at least 65% of their assets in mid-cap stocks, which are companies valued between Rs.5,000 crore to Rs.20,000 crore.
Mid-cap funds have also shown impressive historical performance. For instance, the BSE Mid-Cap Index has surged 31.2% this year, significantly outperforming the BSE Sensex’s 12.2% gains.
For long-term investors, mid-cap funds represent an attractive option for growing wealth.
However, what makes them so powerful for long-term investing? Let’s understand the benefits of mid-cap funds for long-term investing.
The Importance of Midcap Equity Funds
Mid-cap funds truly outperform many small and large-cap funds available in the market. This makes them a great investment choice for long-term investors. Here are some features that make mid-cap ideal for long-term investors:
Growth Potential
Mid-cap companies often have more room to grow compared to large-cap firms, making them a great choice for long-term investors.
These companies aren’t as over-leveraged as some of the large-cap firms in sectors like power, telecom, and infrastructure. Instead, they stick to their core strengths, which helps them navigate business cycles better.
Over the long term, mid-cap equity funds have consistently outperformed large-cap equity MF giving investors a chance to tap into higher growth potential without taking on excessive risk.
Market Resilience
Mid-cap funds provide a balance between risk and reward, especially during times of market volatility. Since these companies have already passed the startup phase and have proven business models, they offer more stability than small caps.
Historically, mid-cap equity MF has generated solid returns over the long run with less risk compared to small-cap funds. While mid-caps do experience market fluctuations, the price swings aren’t as extreme.
During market recoveries, mid-cap funds often outperform, as investors become more willing to take on moderate risks for the potential of higher returns.
Dividend Opportunities
Mid-cap funds are not just about growth—they can also be a steady source of income. In fact, 29 companies in the Nifty Midcap 50 have seen rising dividend payouts each year.
This makes them a reliable option for investors seeking both capital appreciation and dividend income.
Portfolio Diversification
Adding mid-cap funds to a portfolio is a smart way to diversify. They provide a middle ground between the lower-risk, slower-growth large caps, and the higher-risk small caps.
By including mid-cap companies, investors can balance their portfolios, reducing the risk of overconcentration in large caps while gaining exposure to new and emerging sectors with significant growth potential. Thus making them a great choice for long-term investors.
Mid-Cap Equity Funds to Invest in 2025
When considering mid-cap funds for 2025, it’s important to not only look at their past performance but also evaluate their management strategies and investment focus. Below is a list of some top-performing mid-cap funds:
| Midcap Equity Fund | 5 Year Returns | NAV |
| HDFC Midcap Opportunities Fund | 31.64% | ₹203.8160 |
| Quant Mid Cap Fund | 38.90% | ₹252.3112 |
| Motilal Oswal Mid Cap Fund | 35.37% | ₹117.6457 |
| Edelweiss Mid Cap Fund | 33.73% | ₹112.5980 |
| Mahindra Manulife Midcap Fund | 32.48% | ₹37.2769 |
As of 6th Nov 2024
Conclusion
Mid-cap equity funds offer a powerful blend of growth potential, market resilience, and diversification, making them an ideal choice for long-term investors.
These funds strike a balance between the stability of large caps and the growth opportunities of small caps, allowing investors to benefit from both worlds.
If you’re looking to grow your wealth steadily over time, mid-cap funds can be a solid addition to your investment portfolio.
