Principal Mutual Fund has launched a Mid Cap fund, which is an open-ended equity scheme investing predominantly in mid-cap stocks. The NFO of the scheme starts on 6 December 2019 and ends on 20 December 2019, while the allotment date will be 30 December 2019 and the reopening date will be 31 December 2019. The Benchmark of the Mid Cap fund is Nifty Midcap 100 TRI.

As per the fund house, strict adherence to the investment process will be undertaken and management of every company will be met before investing in their shares. The fund will follow the Buy and Hold Strategy with a typical horizon of 2-3 years with no active cash calls. The allocation to one singe stock will not be more than 4 per cent of the corpus.

The Principal Mutual Fund Mid Cap scheme comes with two interesting concepts – SMART and My Gain.

SMART aims to protect against sharp fall in the Market while the My Gain will enable shifting appreciated amount to another fund.

Here’s how SMART facility works:

  • SMART Facility which will be available exclusively during NFO period lets you stagger your investment.
  • Initially, 25% is invested in the Principal Midcap Fund and 75% into Principal Cash Management Fund
  • If the market falls below 3% from the date of allotment, the SMART Facility gets activated and 25% of the invested amount is deployed in Principal Midcap Fund.
  • In case if the market does not fall, the switch takes place at month-end from Principal Cash Management Fund to Principal Midcap Fund.
  • If the SMART Facility deployment takes place during the month based on market fall, the month-end switch gets deactivated for that month.

Here’s how My Gain facility works:

  • Invest in Principal Midcap Fund
  • Investment appreciates to reach the target rate of return
  • Units redeemed from Principal Midcap Fund and amount switched to any Principal Fund of your choice

Minimum Application Amount

New Investor – Rs 5,000 for both Dividend and Growth Option and any amount thereafter under each Plan/Option

SMART – Rs 25,000

Systematic Investment Plan: Minimum twelve installments of Rs 500 each

Systematic Transfer Plan: Minimum Six installments of Rs 1,000 each

Regular Withdrawal Plan: Minimum Six installments of Rs 500 each

Summing Up

Mid-caps are inherently more volatile than the large-cap mutual fund schemes. One may consider investing in mid-cap schemes based on one’s risk profile and with a long term horizon. The universe of mid-cap stocks is vast and diverse thus makes stock picking that much difficult. A few stocks within the scheme’s portfolio may work wonders or could become a drag on the performance of the scheme. The role of the find manager becomes equally important and will depend on the conviction based on the company’s fundamental and other factors. Mid-caps can very well act as a kicker of a fund in your MF portfolio but comes with its own share of risks as well.