Best mid cap mutual funds to invest in 2021

Many mutual fund experts believe that mid cap segment is going to be stable and generate better returns in 2021 as well. If you are an aggressive retail investor, looking for good mid cap mutual fund schemes to invest for their long term financial goals, you are at the right place. We have hand-picked a list of consistent performers from the mid cap mutual fund category for you. First things first, some of our recommended schemes have not made it to this year’s list. That is purely based on their poor performance compared to their benchmark and category average. As per our methodology, HDFC Mid-Cap Opportunities Fund was in the third quartile for the last 12 months. L&T Midcap Fund, another scheme in the recommendation list, had also been underperforming. We have added two new schemes to our list this time. Note that existing investors can continue to invest in the above mentioned schemes and wait for the turnaround for some more time. New investors can avoid these two schemes. If you are new to these recommendations, here are a few things you should understand before considering to invest in mid cap mutual funds to meet your long-term financial goals. Mid cap mutual funds invest mostly in mid cap stocks or stocks of mid-sized companies. These companies could become a successful large company. If that happens, you will make a lot of money. However, many mid-sized companies never fulfill their promise. In fact, many of them get into trouble because of dubious management and lack of vision. This is the risk you are taking while investing in mid cap stocks. When the company hits a rough patch, the stock tanks and it may take a very long time to bounce back or it may never regain its glory. When a company faces these phases, its stocks may suffer badly. If you are a new mutual fund investor, you should avoid investing in mid cap schemes. Start with relatively safer large cap mutual funds, gain some experience and confidence before venturing into the mid cap space. But do it only if you have the necessary risk appetite. Otherwise, sacrifice those extra returns and be happy with moderate returns from relatively less risky equity schemes like large cap mutual funds and multi cap mutual funds. Best large cap mutual funds to invest in 2020 Finally, if you have a very high risk appetite and can invest for a long-term horizon of seven to 10 years, you can invest in mid cap mutual fund schemes. We have handpicked five mid cap equity mutual fund schemes that you may consider to invest to achieve your long-term financial goals. Best mid cap mutual fund schemes to invest in 2021Axis Midcap FundDSP Midcap FundInvesco India Midcap fundKotak Emerging Equity Fund Tata Midcap Growth Fund Here is our methodology: ETMutualFunds.com has employed the following parameters for shortlisting the equity mutual fund schemes. 1. Mean rolling returns: Rolled daily for the last three years. 2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H. i) When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast. ii) When H is less than 0.5, the series is said to be mean reverting. iii) When H is greater than 0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series 3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure. X =Returns below zero Y = Sum of all squares of X Z = Y/number of days taken for computing the ratio Downside risk = Square root of Z 4. Outperformance: It is measured by Jensen's Alpha for the last 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). Higher Alpha indicates that the portfolio performance has outstripped the returns predicted by the market. Average returns generated by the MF Scheme = [Risk Free Rate + Beta of the MF Scheme * {(Average return of the index - Risk Free Rate} 5. Asset size: For Equity funds, the threshold asset size is Rs 50 crore (Disclaimer: past performance is no guarantee for future performance.)

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