Best Mid-Cap Mutual Funds to Invest in September 2024

Many mutual fund investors are concerned about valuations in the mid-cap sector. Shares of these companies have seen a strong rally in the last few months. Investors have earned attractive returns on their investments in mid-cap funds. Mid-cap funds have offered an average return of 32.23% in 2023. That might explain why investors are eager for their investments. What should investors do?

Before we answer that question, let’s look at the basics. Mid-cap schemes invest in mid-cap stocks or shares of mid-sized companies. As per Sebi norms, mid-cap schemes are mandated to invest in companies that are between 101 and 250 per cent in market capitalisation. These companies can be leaders of tomorrow. That’s what makes them great bets. If these companies deliver on their promise, the market will reward investors handsomely.

Read also | Defensive-based mutual funds deliver up to 6% returns in August

What happens when these companies fail to deliver on their promises? Well, the market punishes them. And some of them have less than transparent management. In fact, corporate governance is an area that affects many mid- and small-cap companies. The markets, once again, punish these companies severely.

This is what makes investing in mid-cap companies risky. As a mutual fund investor, you cannot overlook these aspects of investing in mid-cap companies. You should invest in these schemes only if you have a very high risk tolerance. You should also have a longer investment horizon, say seven to ten years. A longer investment horizon would help investors navigate volatility better.

Of course, valuations have peaked, so investors should not look for quick gains. Now is the time to proceed with great caution. Continue with your regular investments, but be prepared for some volatility and short-term losses. If you are convinced that midcap schemes are best suited for you, here are our recommended midcap schemes. Follow our monthly update to regularly know how your schemes are performing. Invesco India Midcap Fund has been in the second quartile for the past four months. Axis Mid Cap Fund has been in the fourth quartile for 14 months. Tata Midcap Growth Fund has been in the second quartile for nine months. The scheme had been in the third quartile for seven months prior to that. PGIM India Mid cap Opportunities Fund has been in the fourth quartile for the past five months.Read also | Kotak MF resumes subscription to international funds

Best Mid-Cap Company mutual funds To invest in September 2024:

Our methodology:
ETMutualFunds has used the following parameters to select the equity mutual fund schemes.
1. Moving average returns: Filmed daily for the past three years.

2. Consistency over the last three years: The Hurst exponent, H, is used to calculate the consistency of a fund. The exponent H is a measure of the randomness of a fund’s NAV series. Funds with a high H tend to exhibit low volatility compared to funds with a low H.

i) When H = 0.5, the return series is said to be a geometric Brownian time series. This type of time series is difficult to forecast.

ii) When H < 0.5, the series is said to have mean reversion.

iii) When H > 0.5, the series is said to be persistent. The higher the value of H, the stronger the trend of the series.

3. Downside risk: For this measure we have only considered the negative returns contributed by the mutual fund.
X = Returns below zero

Y = Sum of all squares of X

Z = Y/number of days needed to calculate the relationship

Downside risk = square root of Z

4. Superior performance: It is measured by Jensen’s Alpha for the past three years. Jensen’s Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). A higher Alpha indicates that the portfolio’s performance has outperformed the returns predicted by the market.

Average returns generated by the MF Plan =

[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}[Tasalibrederiesgo+BetadelesquemaMF*{(Rendimientopromediodelíndice-Tasalibrederiesgo}[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}

5. Asset size: For equity funds, the asset size limit is Rs 50 crore.

(Disclaimer: Past performance is no guarantee of future performance.)