5 Key Factors To Consider Before Investing In Mid Cap Funds

1. Past Performance of Funds:

Before selecting a Mid Cap Fund, it’s important to evaluate its performance during all phases of the market cycle. A good fund will outperform its peers not only during the bull phase but also during a bear phase. Since the mid-cap companies are relatively new or not that extensively researched, it takes a keen eye to spot the ones with potential. Mid Cap Funds with good ratings and consistent performance should be opted for investment.

2. Investment Horizon:

To gain from Mid Cap Funds, an investor must be willing to give his investments a time period of at least 7 to 10 years. Equity investments are volatile in the short run and make more sense from an investing point of view to hold for a longer period of time.

3. Age Factor:

The compounding benefits of Mid Cap Funds can only be experienced with time and as a young investor with a good number of years left for retirement, you will have the advantage of age on your end. For an investor who is nearing retirement or is already retired, investing in balanced funds would be a much better option. Age is, therefore, an important factor for consideration while investing.

4. Quality of Fund House:

As we know, mid-cap stocks are under-researched stock so while choosing the fund house it must fulfil certain criteria like an experienced in-house research team that has good coverage and techniques to manage risk, etc. The performance of the fund during both the good as well as the bad cycles must be taken into consideration.

5. Risk Appetite:

The risk quotient of an equity fund varies, unlike its debt counterparts. Even within equity funds, Mid Cap and Small Cap Funds are the riskiest when compared to Balanced funds. If your risk tolerance is high, you may think of investing in Mid Cap Funds. Make sure that the objectives and risk profile of the Mid Cap Fund is aligned with your individual objectives.