Best Mid Cap Mutual Fund 2025 | Top Mid Cap Fund Mutual Fund For Long Term SIP

Summary

In this video, Pranjal Kamra from Finology discusses the process of selecting mid-cap mutual funds, their suitability for different investors, and the challenges fund managers face in this category. He highlights the limited choice within mid-cap funds due to the narrow universe of stocks, and how valuation plays a key role in decision-making. Kamra also explains why certain fund categories, like multi-cap and flexi-cap, may offer better risk-reward profiles. He advises investors on aligning their fund choices with their risk tolerance and goals, and provides insights into how to make informed decisions with a disciplined approach.

Takeaways

• 😀 Mid-cap funds invest in companies ranked between 101 and 250 in market capitalization, offering a higher risk-reward profile.
• 😀 Fund managers in mid-cap categories face a limited stock universe, making their selection process more challenging.
• 😀 84% of mid-cap funds have failed to outperform their benchmark over the last three years, indicating the difficulty of selecting successful funds in this category.
• 😀 The performance of active mid-cap funds is often compared to index funds, but both approaches have their merits depending on the category.
• 😀 Valuation is a critical factor in mid-cap investing. High valuations, such as a P/E ratio of 44, can make mid-cap stocks seem overpriced.
• 😀 When stock valuations in mid-cap funds are too high, even good-quality stocks may not offer good investment opportunities.
• 😀 In the case of mid-cap funds, a balance between quality and reasonable pricing is essential, similar to making decisions in everyday life.
• 😀 Large and mid-cap funds provide a broader selection of stocks (up to 250), offering better flexibility for fund managers in choosing investments.
• 😀 Flexi-cap and multi-cap funds provide a more diversified approach, investing across different market capitalizations, which can offer a better risk-reward balance.
• 😀 If you are looking for a safer alternative with more flexibility, large and mid-cap funds or flexi-cap funds are a better choice compared to mid-cap funds.
• 😀 To help plan investments and assess your risk tolerance, Finology offers free financial goal planning tools on their website.

Q & A

What is the key focus of this video?

The video focuses on explaining the process of selecting mid-cap mutual funds, the challenges faced by fund managers in this category, and offering advice on alternative fund categories for investors.

What does 'mid-cap' mean in mutual fund terms?

Mid-cap refers to companies ranked between 101st and 250th in terms of market capitalization. These companies are considered to have growth potential but also come with a higher level of risk compared to large-cap companies.

Why is the process of selecting mid-cap funds challenging for fund managers?

The process is challenging because mid-cap funds can only invest in a limited number of companies (between the 101st and 250th rank in market cap). This narrow stock universe makes it difficult for fund managers to pick high-performing stocks.

What has been the performance of mid-cap funds in the past 3 years?

Over the last three years, 84% of mid-cap funds have failed to outperform their benchmarks, with many fund managers struggling due to the limited selection of stocks available within the mid-cap category.

What is the difference between index funds and actively managed funds in the context of mid-cap investments?

Index funds in the mid-cap category typically track the performance of a broad index, offering more consistency and lower risk, while actively managed funds depend on the fund manager's decisions and may offer higher returns but also come with higher risk due to the limited stock choices.

What is the significance of 'valuations' in selecting mid-cap funds?

Valuations are crucial because they indicate whether a stock is overvalued or undervalued. In the current market, mid-cap stocks have high Price-to-Earnings (P/E) ratios, suggesting that many of them may be overvalued, which increases the risk for investors.

What is the current P/E ratio for the Nifty MidCap 150 index?

The current P/E ratio for the Nifty MidCap 150 index is 44, which is significantly higher than its 5-year average of 28, making it seem overvalued.

Which mutual fund categories are recommended as alternatives to mid-cap funds?

The video recommends large and mid-cap funds, flexi-cap funds, and multi-cap funds as alternatives to mid-cap funds, as these categories offer more diversification and a better balance of risk and return.

What makes large and mid-cap funds a safer option than mid-cap funds?

Large and mid-cap funds provide a broader selection of stocks, offering more diversification and reducing risk compared to mid-cap funds, which are limited to a smaller range of companies.

What is the key piece of advice for investors in 2025 regarding mid-cap funds?

Due to the current high valuations and limited stock choices, the video advises against investing in mid-cap funds for 2025. Instead, investors should consider other fund categories like large and mid-cap, flexi-cap, or multi-cap funds based on their risk profile and financial goals.