Market speak: Janakiraman R

Look for consistency in mid-cap funds

With category average returns of 16 per cent in the past year, mid-cap funds are the favourites of small investors today. But, you need to pick the right fund. As data show, the best-performing fund has returned 26.75 per cent and the worst-performing one has gained a measly 2.3 per cent. Investors should aim at picking a consistent performer

Relative to large-caps, the mid-cap universe also has a higher degree of variation in quality of business. Mid-cap companies offer better growth opportunities but are also characterised by a higher degree of volatility in performance. This leads to commensurate volatility in their asset prices as well.

A long-term investment horizon and a disciplined and consistent investment philosophy using the systematic route help in exploiting this combination of better growth, higher volatility and a more heterogenous mix.

Understand the risk-return trade-off. Invest through time-tested funds that have shown consistency in their investment style.