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Mid, smallcap funds and how to get the best out of them

Money Control · 6m

Investors' interest in small and midcap funds has surged in recent years, with the number of investor accounts more than doubling for midcap funds and more than tripling for smallcap funds. These funds offer higher growth potential due to being in their growth phase and being less tracked by analysts compared to largecap stocks. However, they come with increased volatility and may undergo prolonged underperformance. To mitigate risks, small-cap funds are diversified, but holding too many stocks can lead to an ordinary portfolio that struggles to beat the benchmark. Some funds have stopped accepting fresh subscriptions due to limited opportunities and high inflows. Despite stretched valuations in some areas, small and midcap segments still offer robust growth stories. Investors should have a long-term view and the risk tolerance to handle volatility when considering these funds. Some noteworthy midcap and smallcap funds include Edelweiss Mid Cap Fund, PGIM India Midcap Opportunities Fund, SBI Magnum Midcap Fund, and Nippon India Small Cap Fund.