Thinking of Investing in Mid-Cap Funds? Here's What You Need to Know
If you're looking to invest in some of the fastest-growing companies in India, Mid-Cap Mutual Funds may offer the right option. With access to high growth stocks that may provide good returns, Mid-Cap Funds are equity funds that invest predominantly in mid capitalised companies. If you have a moderate to high-risk appetite with a long-term investment horizon in view, Mid-Cap Mutual Funds may be suitable for you.
Understanding Mid-Cap Funds
Within Equity Mutual Funds, individual stocks based on market capitalization (value of a company that is traded on the stock market) are grouped together. There are three Market Capitalization groups — also referred to as Market Cap groups — Large-Cap, Mid-Cap and Small-Cap.
Mid-Cap Funds are those that have a significant portion of their corpus in Mid-Cap company stocks. As defined by SEBI, 101st to 250th company by full market capitalization are mid-caps. A mid-cap fund predominantly invests in mid-cap stocks with a minimum of 65% of the fund’s corpus invested in equity & equity related instruments of mid-cap companies.
Why Mid-Cap Funds Are Attractive
What You Need To Know About Taxation
Being an equity mutual fund, investment in mid-cap funds are subject to certain taxes.
Capital Gains Tax — You may earn capital gains when redeeming the units of a mid-cap mutual fund. However, the rate at which capital gains be taxed may depend on the holding period in the scheme.
Points To Remember
It is vital to select quality Mid-Cap Funds that offer experienced in-house research with adequate coverage and sound processes in place to manage risk.
As per the present tax laws, eligible investors (Individual/HUF) are entitled to deduction from their gross total income, of the amount invested in equity linked saving scheme (ELSS) upto Rs. 1,50,000/- (along with other prescribed investments) under Section 80C of the Income Tax Act, 1961. Subject to prevailing tax laws.