Stagger investments while buying mid-cap mutual fund schemes

Investors eyeing a low-cost passive product for their midcap portfolio could consider the new fund offer of DSP Nifty Midcap 150 Quality 50 ETF. Given that midcaps are trading at a premium to their long-term averages, wealth managers recommend staggering investments over the next one year.

The new fund offer closes on December 17. This factor-based fund with an expense ratio of 30 basis points is available through the ETF route only and investors would need to have a demat account to invest in the scheme.

With the quality theme taking a backseat over the last one year, the Nifty Midcap 150 Quality 50 TRI (Total Returns Index) has underperformed with returns of 63% as compared to 78% from Nifty Midcap 150 Index TRI.


"Historically, short-term underperformance by quality is followed by future outperformance," says Anil Ghelani, head of passive investments, DSP Mutual Fund. Ghelani believes higher the underperformance, better will be the future outperformance.

Over a 10-year period, Nifty Midcap 150 Quality 50 TRI has returned 18.6%, as compared to Nifty Midcap 150 TRI's gains of 13.9%. The average returns of an active midcap fund in this period is 14.1%. In 11 out of 17 calendar years - Nifty Midcap 150 Quality 50 TRI performed better than Nifty Midcap 150 TRI.