For investors looking for potentially high returns over the long term, Motilal Oswal Midcap Fund has consistently attracted attention. Offering significant growth in both lump sum and SIP investments, the fund has delivered returns that outpace many other options, making it popular among high-risk investors. This open-ended midcap-focused equity scheme has shown a strong performance since its inception, but it comes with considerable risk due to the volatility of midcap stocks. Here’s a closer look at the fund’s performance, asset allocation, and who should consider investing in it.
Motilal Oswal Midcap Fund’s Long-Term Growth Potential
Motilal Oswal Midcap Fund is designed for those seeking substantial capital growth over a long investment horizon. Since launching on 24 February 2014, it has achieved impressive returns. Here’s a snapshot of its performance for lump sum investments:
- 10-Year Growth: Initial investments in 2014 have grown 10.75 times.
- 5-Year Growth: The fund has increased by 4.17 times over the last five years.
- 3-Year Growth: The value of investments grew by 2.55 times in just three years.
This consistent upward trend showcases the fund’s potential for strong returns. However, high returns also imply greater risk, a characteristic common in mid-cap stocks, which are generally more volatile than large caps.
Quick Insight: For those investing via SIP, a monthly SIP of Rs.5,000 could have grown to nearly Rs.8 lakh in five years, which highlights the potential benefits of long-term investment strategies.
Annualized Returns and Impressive SIP Gains
Mutual fund investments in SIPs can help in averaging the cost and reducing market volatility over time. Motilal Oswal Midcap Fund has delivered commendable annualized returns across different time frames:
- 1 Year: 64.46% return
- 3 Years: 33.39% return
- 5 Years: 33.15% return
- 10 Years: 22.16% return
SIP investors have also seen strong results:
- 3-Year SIP of Rs.5,000: Rs.1.8 lakh invested, yielding a fund value of Rs.3.3 lakh.
- 5-Year SIP of Rs.5,000: Rs.3 lakh invested, now worth around Rs.8 lakh.
- 10-Year SIP of Rs.5,000: Rs.6 lakh invested, growing to Rs.23.12 lakh.
Pro Tip: By using a SIP, investors can benefit from market fluctuations through rupee cost averaging, which can stabilize returns over time.
Investment Strategy: Focus on Mid-Cap Companies
The fund’s primary strategy is to invest predominantly in mid-cap stocks, with at least 65% of its portfolio dedicated to mid-cap companies. This approach targets stocks with high growth potential, helping the fund outperform in the long term. Mid-cap companies are generally more dynamic and can deliver substantial returns, although they often come with increased risk due to market fluctuations.
Top Holdings Include:
- Kalyan Jewelers India Ltd. – 10.0%
- Polycab India Ltd. – 9.5%
- Jio Financial Services Ltd. – 8.8%
- Coforge Ltd. – 8.5%
- Persistent Systems Ltd. – 7.9%
These selections reveal the fund’s focus on companies with growth potential in various sectors, such as finance, technology, and industrials. However, such an allocation also emphasizes the importance of a high-risk appetite for investors in this fund.
Asset Allocation and Risk Level
As of September 2024, Motilal Oswal Midcap Fund’s portfolio allocation is:
- Equity: 80.98%
- Debt and Other Instruments: 19.02%
This balanced structure provides some cushion against market fluctuations, but with 81% invested in equity, it’s still categorized as very high risk. This fund suits investors willing to withstand market ups and downs in the hope of higher long-term gains.
Key Note: The fund’s benchmark index, NIFTY Midcap 150 Total Return Index, reflects the overall market performance for mid-cap stocks, making it a reliable measure to track fund growth.
Fees, Minimum Investment, and Exit Load
To invest in Motilal Oswal Midcap Fund, one can start with a SIP as low as Rs.500, making it accessible for a range of investors. However, there’s an exit load of 1% for redemptions made within a year, which incentivizes long-term commitment.
Insight: Long-term investors can avoid exit loads entirely by keeping investments in place for over a year, aligning well with the fund’s goal of capital growth over extended periods.
Who Should Invest?
Motilal Oswal Midcap Fund is best suited for:
- Long-Term Investors: Those who plan to invest for at least 7-10 years.
- High-Risk Investors: People with the financial cushion to withstand market volatility.
- Growth-Oriented Investors: Investors looking to outpace inflation with above-average returns.
The fund has demonstrated a successful track record but requires patience and the ability to handle potential short-term losses. Given the high risk involved, conservative investors or those seeking stability might want to explore other options.
Key Takeaways
Motilal Oswal Midcap Fund offers substantial returns for those willing to navigate the market’s ups and downs. It’s a choice for long-term, high-risk investors who prioritize growth and can afford to keep their capital invested during volatile periods.
