A mutual fund is a professionally managed company that collects money from many investors and invests it in securities such as stocks, bonds and short-term debt, equity or bond funds and money market funds.
Mutual funds are a good investment for investors looking to diversify their portfolio. Instead of betting everything on one company or sector, a mutual fund invests in different stocks to try to minimize portfolio risk.
The term is typically used in the US, Canada and India, while similar structures around the world include the SICAV in Europe and the open-ended investment company in the UK.
What are mid-cap funds?
Market capitalization is the average of the full market capitalization of the security on all recognized exchanges on which it is listed
, or the full market capitalization of the security on the single exchange on which it is listed. Fund managers invest in companies according to the fund’s investment objective, and investors know what they are investing in. For example, mid-cap growth funds should have an asset allocation to the mid-cap segment with a growth-oriented investment style, and their portfolio must reflect this. This helps investors compare funds with a similar mandate. Portfolio balancing must be done regularly as market capitalization changes with the movement of the stock price on the stock exchange.
Mid-cap mutual funds invest in mid-cap companies with higher growth potential, but they do not present risks associated with small capitals as these companies have achieved a certain scale and stability. Mid-cap mutual funds offer higher returns than large limits without being as risky as low-income funds.
As you choose the best mid-cap mutual funds, look beyond recent 3-5 year returns for consistency of performance over longer periods and compare to appropriate benchmark returns.