A preferred strategy amongst many is to invest in companies which have an evolving business model and a long growth runway. In other words most investors favour investing in midcap companies. Now there are three ways to do this
The first option is for one to research i.e. do your fundamental analysis, do your technical analysis if you understand it and then invest
Secondly, one can engage the services of a fund manager and invest via an actively managed midcap mutual fund or a PMS
And option number 3 is the passive style of investing wherein one can invest via a midcap index fund
In this video, we shall focus more on that third option and examine the Nifty Midcap 150 Index in greater details, as we study it’s construct, the companies that make up the index, the sectoral composition, it’s valuation and how the Midcap 150 has performed against different indices
► CONSTRUCT OF NIFTY MIDCAP 150 INDEX
The Nifty Midcap 150 Index consists of 150 companies. These companies are ranked between 101 and 250 in the Nifty 500 index and this ranking is based on the company’s full market capitalization.
► WEIGHTAGE OF COMPANIES AND SECTORS
When it comes to the Nifty Midcap 150 the companies that are selected to be a part of it depend on their full market capitalization. However those same company’s weightage in the Midcap 150 index depends on their free-float market cap
Another interesting point to note is that the midcap index is a very moving index, some companies which are doing well will move out of this index into the bigger Nifty 100 index over time and likewise some of the poor performing ones will move to the small cap index
This way there is a leaky bucket from both ends which should really not bother as investor as long as he or she has a smartly distributed asset-allocated portfolio
► PERFORMANCE
Like any equity based investment, the midcap 150 index has had periods of ups and downs but nevertheless, the index has given excellent returns over the long run
Risk and return almost never move in a linear fashion and this difference in midcap and smallcap performance is proof of that. The second comparison is on how the Midcap 150 index has performed in comparison to actively managed mid-cap funds. Now, we have already established that the Nifty Midcap 150 TRI has generated returns of a little over 15% in these last 15 years
This number does not include an expense ratio and since, we don’t have a long performing midcap index fund we’ll take a call and setup a charge of 0.5% in our estimates towards expenses
► SUMMARY
Now, the simplest way to invest in the NIFTY Midcap 150 Index is to choose an index fund or ETF that tracks this index
• ADITYA BIRLA SUN LIFE NIFTY MIDCAP 150 INDEX FUND
• ICICI PRUDENTIAL MIDCAP 150 INDEX FUND
• MOTILAL OSWAL NIFTY MIDCAP 150 INDEX FUND
• NIPPON INDIA NIFTY MIDCAP 150 INDEX FUND
► Chapters
00:00 Introduction
01:04 Construct of NIFTY Midcap 150 Index
02:53 Weightage of Companies and Sectors
06:52 Performance
11:36 Summary
► RESOURCES
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