Before we answer it, let’s try to examine some peculiar characteristics of mid-cap stocks or funds. Mid-caps typically tend to underperform large-caps in a falling market and outperform when the market sentiment reverses or when the economic environment improves. In other words, mid-caps have historically done well in the periods following market bottoms.
Mid-cap funds should form part of equity allocation of every investor whether retail or high net-worth. How much money one should invest depends on your investment objective and asset allocation. If the objective is growth or capital appreciation versus stable returns, higher allocation should be made to mid-cap funds. When used judiciously, mid-cap funds can be ideal tools to build your wealth, without hurting yourself (small investor) in the process.