With the oncoming of the General Elections, one should gear up for some major shift in the market scenario and other factors that dominate the earnings of the investors. This being said, investors should really put their knowledge about the existing market into use and test the water of small and mid-cap funds now more than ever. Companies that are enlisted between 101 and 250 and earn revenue that is comparatively less than that of the large-scaled top 100 companies are known as mid-cap companies and the funds that are invested in such companies are known as mid-cap funds. The companies that have a capital smaller in size than that of the mid-cap companies are known as small-cap companies and their funds as small-cap funds.

Reasons why investors should consider small and mid-cap funds now

Both small and mid-cap funds are heavily influenced by factors like the hike in oil prices, weak currency, inflation and global investment market scenario and have their share of perks and make them suitable under the current market situation. Let’s discuss the possibilities that make them suitable for the investors now:

• Both small-cap and mid-cap have a high risk and reward factor going on for them but when they are invested in investment tools like quality funds, they tend to show positive results.
• A long time horizon tends to play a favourable role towards the investors of both small and mid-cap funds. Investors who hold on to their share of investments for a considerable period of time not only evade a portion of risk but can also recover from its blow through the tenure with ease.
• Adopting a systematic approach of investment like SIP can prove put to be beneficial for the investors of both small and mid-cap funds. The current low phase of the market acts as an opportunity for the investors to buy units of small and mid-cap companies at a comparatively lower price. Since experts are expecting a change in the market scenario by the last quarter of the year, it can be said that small and mid-cap funds look promising for those investors who are hoping to gain better returns from their investment endeavour in these companies.
• Often due to the play of behavioural finance, lump sum investors don’t feel comfortable with investing in varying proportion in diversified funds over a stretch of time. But in order to take full advantage of the current situation, lump sum investors can park their money in liquid funds and at the same time test the water of small and mid-cap funds in not more than 5-10 slices to tide over the effect of entering the same at such high rates of NAV.

The various market and behavioural factors tend to push the ball at the court of small and mid-cap investors now more than ever. Find out from us how you can make the most of this situation and ensure a steady flow of income through your investments in small-cap and mid-cap funds.