Can Mid Cap Funds Be Used For Long Term Investment


The problem with most investors is that they do not understand how much to invest from their savings in order to achieve their life’s financial goals. We as individuals tend to get emotionally connected with our investments because they give us hopes to achieve our life’s goals. We all save so that we can purchase something that we always wanted. For some it can be a big house, for others it’s a luxury car, and the list can go on. Some investors save so that they can have a stress-free post retirement life, while others seek investments so that they can build a corpus for their daughter’s grand destination wedding. Depending on your investment objective, your age, income and existing liabilities investors should decide where and how much they should invest. If you know how to control your expenses, then you will be able to save enough. But remember that savings alone may not be able to help you achieve wealth. If you wish to accumulate wealth over the long term, then you need to start investing at an early stage in your life.

Mid-cap funds have the potential to offer investors an opportunity to fetch higher returns at a much higher risk. These funds invest in companies with medium market capitalization. Market capitalization of mid-cap companies is low, and therefore they have a great chance to produce above-average capital returns in the long term. They also hold the potential to grow at a constant pace irrespective of the existing market conditions.

How can midcap funds help achieve life’s long term financial goals?

Mid cap funds are professionally managed funds: Midcap funds are generally owned by reputable AMC or fund house that host an elite and highly experienced fund management. It is the responsibility of the fund manager and all the research analysts to analyze and interpret market data to buy and sell securities in quantum with the scheme’s investment objective. A team of experienced fund managers might successfully help a mid cap fund achieve its underlying benchmark.

Mid cap funds are available in growth option: If you are looking for regular income through your mutual fund investments then you can go with the dividend option. However, if you wish to see your investments multiply and grown into a commendable corpus then you should consider opting for growth option. In the growth option, the capital appreciation earned by the mid cap fund is invested back in the scheme. Over the long term, the reinvesting of interest can turn into a large corpus.

SIP is the best way to invest for long term capital gains: There are multiple ways to invest in mid cap funds. You can either make a onetime lumpsum investment right at the beginning of the investment cycle. But if you want to build wealth then you should consider starting a SIP in midcap funds. A Systematic Investment Plan is an easy and convenient way to invest in mutual funds. With SIP, all an investor has to do is complete a one time mandate with his or her bank following which every month on a fixed date a predetermined amount is debited from your savings account and electronically transferred to the mid cap fund.

Investing in mid caps funds may hold the potential to offer you capital appreciation over the long term. But investors should also understand that mutual fund investments do not guarantee returns. Hence, investors should not only depend on one investment avenue to achieve their life’s long term financial goals. Also, it is better to consult a financial advisor before investing.

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