Mid-cap equities, unlike large-cap stocks, have a double-edged sword of stronger growth potential but higher risks. Before investing in them, an investor must first understand the company's fundamentals, as well as the present status of the markets and the macro-economy. Before you start investing, always consider going with one of the best brokerage firms in the country like Zebu. As a top broker in share market we have created one of the best stock trading platforms, for you to use and invest. Before you add more shares to your mid-cap portfolio, keep the following 10 things in mind: 1. Availability of liquid assets When it comes to mid-cap investing, liquidity is the most important factor. You must make sure that you can get out of the stock before it loses too much value. Stocks, where mutual funds or proprietary traders have purchased large quantities, should be avoided by retail investors. These stocks are vulnerable to a quick selloff and significant, surprise price loss. 2. Previous performance A steady track record of good performance over the last 4-5 years is an important indicator of a company's stability. A shaky track record, as well as a P&L statement rife with losses and declining sales, is a red flag. 3. Exposure to macroeconomic forces Examine the company's pressure areas before investing. When demand for automobiles falls, mid-cap stocks in auto-ancillaries suffer. Mid-cap metal equities are vulnerable to global oversupply and fluctuating raw material prices. To understand the dangers that your stocks face, look at the macro variables. 4. Mid-cap stocks' returns Mid-cap stocks should be viewed through a different lens than Nifty and Sensex stocks. Benchmark indexes should not be compared to mid-cap stocks in the first place. Mid-cap stocks come with greater rewards but also a greater risk. If you are able to identify under-valued mid-cap stocks, your portfolio's value will drastically increase. 5. Pay attention to mid-cap exposure. Find the total exposure you want to have to mid-cap companies based on your risk tolerance levels and keep to it. Let's say you decide to invest 30% of your portfolio in mid-cap equities, and you adhere to it. If you go over the limit, take profits and limit your exposure. 6. Examine the leadership and business governance Mid-cap companies have received a lot of bad press due to poor corporate governance and mismanagement. Make sure the companies you invest in have strong internal controls and a high level of corporate accountability. A well-oiled, well-managed corporation will have a strong management team. 7. Risks must be monitored before returns can be managed When it comes to mid-cap equities, the risk is measured in terms of volatility. Concentrate on stocks that have higher risk-adjusted returns. The investor can expect a good return if he handles the risk. Increasing risks in the pursuit of a high return, on the other hand, is equivalent to risking hard-earned money. 8. Stay away from stocks that have a lot of pledges. Rather than being enticed by large gains, retail investors should keep an eye out for stocks that have more than 50% promoter pledges. When the promoter fails to bring in additional margin and the lenders begin to dump the shares, these shares are extremely exposed to price fluctuations. 9. Be aware of regulatory circulars. The market regulator SEBI has had a significant impact on mid-cap equities in the past. Three SEBI circulars released in 2018 sparked a free-fall in mid-cap stocks. When buying in mid-cap stocks, investors should be aware of SEBI's regulars. 10. Bullish vs bearish time periods During optimistic periods, investors flood the market with liquidity, drowning out the company's fundamentals. Only during difficult times is a company's resilience truly tested. As one of the top brokers in share market, we have created the best stock trading platform for you to invest in wisely. Our tool is designed to help investors and traders like to analyse a company with a wide range of indicators and screeners as per your strategy. As one of the best brokerage firms in the country, we invite you to open a trading and investment account with us.
When the government announced a lockdown in March 2020, the stock markets in India plummeted. However, thanks to investors adding a healthy dose of mid-cap stocks to their portfolio holdings, the markets recovered quickly and spectacularly.
