When is the right time to buy Mid Cap funds?

POSTED BY Arch ON December 10, 2010 10:49 am COMMENTS (6)

I have been looking at the mid cap run and it seems to be cooling off a little now. From what I understand mid caps have high risk and high return. Is there any time period recommended to stay in mid cap rally? I am basically looking to enter mid cap fund for a duration of one year and exit booking the profits. I already have well diversified portfolio of MF investments in core and satellite prortfolito. 

Has anyone deployed this strategy for short term profit booking?

What I feel is it may be difficut to predict the right time to enter. Exit time can be easily decided once the gain% is reached.

 

6 replies on this article “When is the right time to buy Mid Cap funds?”

  1. Atul says:

    Hi Arch,

    Do not try to time the market. Start investing via SIP now and be invested for more than 5 years to see the positive results.

    Regards

    Atul

  2. Ramesh Mangal says:

    @Arch
    No one has been able to point out “where the markets will be in the future” yet. 🙂

    So your strategy for using mid-caps (or any method in equity markets) to achieve short-term goals is not going to work consistently. It may happen that this works in secular bull runs, but you can attribute that to pure luck and nothing else. If it has worked, it would not work in future and vice versa also!

    Large market movements are usually because of unknown and unpredictable surprises, both upwards as well as downwards.

    Ramesh

  3. Arch says:

    Ramesh the gain will be used purely for short term goals.

    In case the target gain is not reached I will prefer to exit provided I am not taking loss 🙂
    The extension purely depends on the capital need during that time.

    Personally I feel mid cap is better diversified risk wise than thematic funds..lol 😀

    On the taxation front the reason I said one year is to get the tax exemption, I can hold the fund for 1 year even if on the 6th month i reach 30% gain unless there is an extreme case of downfall trigger.

    I am checking weather this strategy can be used for short term goals taking the high risk into account.

    Has anyone used such approach earlier for short term goals? Please chip in 🙂

  4. Ramesh Mangal says:

    @Arch

    And then what will you do with the gains! Invest it elsewhere entirely or consume the profits or consume the entire amount?

    WhatIF you do not gain 25% in 1 year? Are you prepared to extend that time period or will you be happy with whatever gains / losses are there?

    Why to put money in midcap fund (with supposedly more risk) and not elsewhere. Say banking / FMCG / pharma sectoral funds for example.

    Also, why are you so govt-friendly that you want to give them tax on your short-term capital gains?!? 🙂

    Ramesh

  5. Arch says:

    Ramesh I am looking between 25% – 30% Max. Once I reach the target I would prefer to sell and book gains. I am doubtful if 1 year term may be too short?

  6. Ramesh Mangal says:

    @Arch

    What is the gain% you are looking at?

    Ramesh

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