First, let us understand what this term means, with regards to investing, and how such an investment vehicle operates. Before we get into defining what mid cap funds are, we need to know what stock funds are. A stock fund is an investment tool that invests in stocks or shares, which are also known as equity securities. In other words, stock funds invest in the common stock, or shares, of several publicly listed companies. Trading in such stock has become a popular activity since it allows for a diversified investment portfolio, and stock funds are popular as they save the investor a lot of time which would otherwise be spent in the researching, buying and selling of individual shares. Stock funds can help investors save substantial amounts of money as well, given an efficient infrastructure.

Stock funds are the exact same thing as equity mutual funds. Such funds can be further classified into several categories. These categories are based the sizes of the companies that they invest in, the different sectors of the industry they deal with, the manner in which the holdings are invested, the system of returns and so on and so forth. A mid cap fund is, essentially, another one of these categories that stock or equity funds can be divided into. Such types of stock funds invest only in, as the term itself suggests, mid-sized companies. The size of a company is determined by its market capitalisation, and mid-sized companies are those whose market caps are of a particular monetary measure. This figure is subject to regular change, but for the sake of providing an example, one may say that mid-sized companies are those that fall in the range of one to ten million rupees in market cap, or some such figure.

Most funds that invest in mid-sized companies channel their investment capital into the stocks of established, but still developing, businesses. The advantage of such an investment is that it allows the investors to avail of the benefits of growth, while being protected from the unpredictable nature of funds in the small cap category. Looking at the history of mid-cap investing, one sees that these types of funds have consistently delivered positive returns, especially in relation to small and large cap funds. Such an investment is situated at an ideal spot in the cycle of financial growth. It is a stable investment, but with adequate potential for scalability. The high possibility for expansion as well as a mergers and acquisitions (M&Q) make a compelling case for investment in mid cap funds.