Here’s Why One Can Diversify Their Portfolio With Mid Cap Funds


If you are have initiated financial planning, you must be aware that you need to diversify your investment portfolio by spreading your investments across various asset classes. It is never a good idea to depend on one asset class like gold, real estate or equity for income generation. Investors should always keep a diversified portfolio with a mix of conservative as well as new market linked scheme investments. Conservative schemes offer fixed interest rate but the interest rate on offer these days is unacceptable. With such low interest rates, one might not be able to achieve their life’s long term financial goals.

If you are a young individual with an aggressive investment approach then you can consider investing in equity schemes like mid cap funds. Equity mutual funds are further categorized by SEBI based on the market capitalization they choose to invest in. For example, large cap funds invest in stocks of large cap companies. Hybrid schemes allocate their assets in both equity and debt asset classes. Similarly, a mid cap fund is an open ended equity mutual funds scheme that invests across mid cap stocks and other equity related instrument.

Diversify your mutual fund portfolio with mid cap schemes

Here’s why you should consider adding mid cap schemes to your investment portfolio –

Mid cap funds are ideal for long term goals

If you have long term financial goals like buying your dream home or sending your children overseas for higher education or want to surprise your daughter by giving her a destination wedding, then you can consider investing in mid cap schemes. Since mid cap schemes are equity oriented one might not be able to achieve much through short term investment. Equity investments are prone to market volatility but are known to offer far better returns in the long run. Hence investors can target their life’s long term goals by investing in mid cap schemes.

Mid cap schemes are available in regular and direct plan

Mid cap schemes can be bought by retail mutual fund investors either through a direct plan or a regular plan. A direct mid cap fund plan is offered by the fund house owning that particular mid cap fund. The expense ratio of owning a direct is plays is always low. On the other hand a regular plan is available with aggregators and investors can buy this plan through a broker or mutual fund agent. However, since a third party is involved in the selling of the scheme, the expense ratio of owning a regular mid cap scheme is always higher.

Mid cap schemes offer multiple investment

You can either make a lump sum investment or start a monthly SIP in mid cap schemes. A lump sum investment is where the investor must pay the entire investment amount right at the beginning of the investment cycle. Since you make a lump sum investment, investors receive units in large quantities. However, if you want to inculcate the discipline of regular investing then you can consider starting an SIP in mid cap schemes.

A Systematic Investment Plan is an investment tool where you can invest small amounts at fixed intervals in mid cap schemes. All an investor has to do is decide on the monthly SIP investment amount and also complete all the pre investment KYC formalities. After this, every month on a fixed date a predetermined amount will be auto-debited from the investor’s savings account and electronically transferred to mid ca schemes. SIP investments are ideal for anyone who wishes to inculcate the discipline of savings and regular investing.

You can diversify your mutual fund portfolio with mid cap funds, however, it is better to consult your financial advisor before investing.

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