During a bull phase, mid cap stocks tend to profit quite large caps but lesser than small caps, while their performance within the bear phase lies between these two categories. As are often inferred from subsequent table, these stocks have generated higher returns than large caps during bull phases with considerable margin whilst their decline during the bear phase has been limited compared with small cap stocks.
Another factor that investors previously wont to worry about liquidity of the underlying stocks within mid caps is additionally slowly and surely fading with the increase in investment within the category. this is often reflected within the reduction of impact cost, which represents the value of executing a transaction during a given stock for a specified order size (in this case T5 lakh) at any given point of your time . Impact cost may be a practical and realistic measure of liquidity of the underlying stocks. As are often seen from the table below, mid cap stocks have seen a pointy decrease within the impact cost over the five years ended May 2019 in line with the market trend, showcasing an improvement in liquidity of those stocks.
Mid cap funds - an able investment solution, isn't it?
While mid cap stocks provide an optimum investment diversification for equity investors, finding the proper stock through in-depth research won't be easy for people without the time . Instead, investors may check out investing within the category of stocks through mid cap funds. These, as mandated by the regulator SEBI, are required to take a position a minimum of 65% of their investment in mid cap stocks. As seen within the stock (index) performance, mid cap funds have performed well within the mid to future , delivering potentially higher returns than all other categories.
Mid cap funds provide an able alternative for investors to derive enjoy mid cap stocks over the future . Investors should however note that since these tend to be riskier than the massive caps, they ought to limit their exposure to the present category.Further, investors would be more happy investing in equity mutual funds through the systematic investment plans (SIP) route over the future . Not only does it inculcate discipline in investing, but also reduces the volatility related to the markets, which is additionally called rupee cost averaging. Another fallacy that investors follow is to seem at the recent performance of funds before investing. it's important that investors check out the future performance of the scheme versus the benchmark and peers, and therefore the portfolio trends of the scheme. Further, track and review your investments post investing.
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