Features of Mid-Cap Mutual Funds
Mid-Cap Mutual Funds have specific features that set them apart from other types of mutual funds. To understand more about Mid-cap mutual funds, let’s see their features:
1. Volatility: Mid-cap stocks can be more volatile than large-cap stocks but less volatile than small-cap stocks. This means that mid-cap mutual funds may experience periods of price fluctuations in the live market. Investors should be prepared for some level of volatility in their investments.
2. Diversification: Like other mutual funds, mid-cap mutual funds, also collect money from multiple investors to invest in a diversified portfolio of mid-cap stocks in the share market. Diversification helps spread risk and reduce the impact of poor-performing stocks within the portfolio. So it makes them very less risky.
3. Investment in Mid-Cap Stocks: Mid-cap mutual funds primarily invest in stocks of mid-sized companies, which typically have a market capitalisation between $3 billion and $10 billion, although the exact definition of mid-cap can vary among different fund managers. These companies are considered to be in the middle ground between large-cap and small-cap stocks.
4. Expense Ratios: As with all mutual funds, mid-cap mutual funds charge expenses, including management fees and administrative costs. It’s essential for investors to review the expense ratio, as lower expenses can contribute to better overall returns.
5. Moderate Risk and Return: Mid-cap stocks are known for offering a balance between the growth potential of small-cap stocks and the stability of large-cap stocks. Consequently, mid-cap mutual funds are considered to have a moderate level of risk and the potential for moderate returns. They may be suitable for investors seeking a middle-ground investment option.
6. Risk Tolerance: Investors should assess their risk tolerance and investment goals before investing in mid-cap mutual funds. While they offer a balance between risk and reward, they may not be suitable for extremely risk-averse investors.