When it comes to investing, there will always be risk. The idea, though, is to manage that risk. One way to manage the risk associated with stock investing is to include mutual funds in your investment portfolio. And some of the best mutual funds are mid cap funds. Mid cap funds offer interesting opportunities to invest in a range of companies that provide adequate growth for your investment portfolio, while allowing you to manage your risk.
What are mid cap funds?
Funds are divided into three categires: small, mid and large. Small cap funds include companies whose market capitalization, or the public consensus of a company's value, is less than $1 billion. A large cap fund is one that consists of companies that have a market capitalization of more than $8 billion. And, as you might guess, a mid cap fund is in the middle: market capitalization of between $1 billion and $8 billion. Mid cap funds offer a range of opportunities to invest in companies that are growing, but that offer a reasonable amount of risk.
Why mid cap funds can be a happy medium
Mid cap funds make a happy medium in the realm of investing ideas because they grow at a faster rate than large cap funds, but carry lower risk than small cap funds. While all investing carries risk, some carries more than other. Large cap funds are relatively safe, as fund investing goes, but as a result, the returns are lower. Whenever you risk more, you have the potential for greater return (and losses, don't forget!). So small cap funds offer the best chance of return, but the risk can be quite high.
Mid cap funds present the middle of the road view. Most mid cap funds average around 11 percent returns, and they feature a risk level that most people can tolerate. Mid cap funds can be a great way for you to diversify your investment portfolio. They allow you to avoid the hits taken when one particular sector of the stock market falls. Additionally, they are great additions to your retirement account, as they can help you save at a fairly high rate, while at the same time balancing your risk.
If you are looking for a way to diversify your investment portfolio and increase your chances of growth while maintaining a reasonable amount of risk, you might consider mid cap funds in your investing strategy.
Disclaimer: I am not an investment professional. Any investment carries risk, and the possibility of losing money. Before making investment decisions, check with an investment professional and/or do your own research.
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