Among various categories from equity mutual funds, mid cap funds has its own charm. This category is able to deliver very high returns when markets are doing well. These fascinating returns are what make investors go for them. But on other side they also get the most of the beating when market is otherwise in a bad phase. The variation between fall and rise can be huge in mid cap equity funds which makes an investor think whether to invest in mid-cap equity funds or stay away from it or invest partially.
Here we understand the category and why mid cap equity funds, despite its inherently risky nature, can enhance your portfolio returns-
Performance
Before we understand the inherent risk attached to mid-caps let’s see how they have delivered in the past. When you look at the market history then we see the outperformance of mid cap index during the bigger market crashes. Take for instance 2008 and 2010.The mid cap index have outperformed the Sensex and Nifty by almost 17-25%. Similarly, if you look at the performance of mid cap and large cap index in last three to five years then mid-caps have delivered almost 80-100% in comparison to large cap index 25-40%. While analyzing the calendar year performance, in 2015 large cap was down by almost 2% while mid and small cap index have delivered 6-10% return. Going back to 2011, the year saw large cap falling by 23% whereas mid and small cap fell by almost 27%. So the historical picture shows that mid and small cap tend to deliver superior returns but also tend to fall higher during market downfall.
