Is it time to invest in mid cap and small cap mutual fund schemes?

Pundits – be it mutual fund managers, advisors or stock market experts – are busy predicting the revival of mid- and small-cap category. Some see values again after the recent fall in these categories, while some believe this is the right time to enter in small cap and mid cap segments. Are you wondering what to do?

“We are expecting small and mid cap funds to start performing again in the next couple of quarters. Though we don’t believe that they will offer 50 per cent returns like before. This is why we say that investors who have invested in small cap funds or mid cap funds should stay invested and not sell their investments because of the short-term performance,” says Suresh Sadagopan, Founder, Ladder7 Financial Advisories.

Sadagopan believes that investors have started ignoring small and mid cap funds after they started offering negative returns in the one year. The mid cap mutual fund category has offered -13.68 per cent returns in one year and the small cap category has returned -22.69 per cent in the same time.

Many investors, who had started investing in mid cap and small cap schemes a few years ago, had stopped their SIPs after the markets started falling in 2018. “There is no point in stopping your SIPs when the markets go down but a lot of investors indulge in this process. Taking tactical calls works sometimes but investing via SIPs regularly will work every time and is hassle free,” says Puneet Oberoi, Founder, Excellent InvestmentAdvisorz.

Is this the right time for them to start investing again? Puneet Oberoi answers yes. “Investors should start their SIP and keep investing in a disciplined way. The money that they are not investing right now is not growing. Investing from now to when the markets start going up will average their cost and help them in the long run.”

“For the new investors, we never advised small cap funds ever. If you are a new investor and you wanted to start investing even in 2017 or 2018, we would have never advised for a small or a mid cap funds because they are too risky. New investors should choose a hybrid fund according to their risk appetite or a multicap fund if they can invest in pure equities. Choosing a fund has nothing to do with the current market scenario. It should be in line with your risk profile,” says Ankur Maheshwari, CEO, Equirus Wealth.