Mid cap funds have offered an average return of 32.23% in 2023. That could explain why investors are anxious about their investments. What should investors do?
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Before answering that question, let us cover the basics. Mid cap schemes invest in mid cap stocks or in stocks of medium-sized companies. As per Sebi norms, mid cap schemes are mandated to invest in companies that are between 101 and 250 in the market capitalisation. These companies can be leaders of tomorrow. That’s what makes them great bets. If these companies live up to the promise, the market will reward the investors handsomely.
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What happens when these companies don’t live up to their promises? Well, the market punishes such companies. And some of these companies would have managements that are not clean. In fact, corporate governance is an area that plagues many mid cap and small cap companies. Markets, again, punish such companies severely.
This is what makes investing in mid cap companies risky. Being a mutual fund investor, you cannot overlook these aspects of investing in mid cap companies. You should invest in these schemes only if you have very high risk tolerance. You should also have a longer investment horizon of, say, seven