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What are Mid-Cap Growth Funds?

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  • Written By: Lindsey Rivas
  • Edited By: Heather Bailey
  • Last Modified Date: 14 July 2018
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    Conjecture Corporation
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Mid-cap growth funds are mutual funds that are invested in stocks of various companies. The stocks are usually for companies that have capitalization of $5 billion to $10 billion US Dollars (USD). These types of growth funds typically generate capital gains rather than income. Also, since they are mutual funds, investors have the ability to buy or sell shares at any time. There are, however, fees and risks associated with investing in mid-cap growth funds.

The majority of stocks that make up mid-cap growth funds are for companies with mid-capitalization. These funds are considered to be less aggressive or risky than small-cap funds, which are invested in companies with capitalization of less than $5 billion USD, but they are more aggressive than large-cap funds. Certain size funds will do better at different times depending on the state of the economy.

Growth funds are typically invested in stocks of companies with rapid growth. The companies commonly reinvest profits for research and development instead of paying dividends to stockholders. Also, the companies are expected to do well in general, so their stock continuously grows in price. Consequently, mid-cap growth funds produce capital gains through price appreciation over time.

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Mid-cap growth funds are a type of mutual fund, which is an open-end investment company. There is no limit to the number of shares offered, so there are always shares available. Investors have ownership in the fund proportional to the number of shares owned. They can also buy or sell shares at any time. When investors sell shares, the mutual fund redeems the shares at the net asset value, which reduces the value of the fund by the value of the shares sold.

Like all mutual funds, mid-cap growth funds have expenses and risks. Investors might be charged a sales charge when purchasing fund shares or a redemption fee when selling shares. There are also expenses for managing and maintaining mutual funds, which are listed as expense ratios for the funds. The funds are also subject to risks, including loss of money due to market risk or principal risk.

The mutual fund managers for mid-cap growth funds typically determine which companies to invest in to try and maximize earnings. The prospectuses for the funds will typically indicate which companies the funds hold stocks in. Also included in the prospectuses are the fund objectives, performance history, risks and expenses. Investors should be aware of the information within the prospectuses to ensure that the funds are suitable for their needs.

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