Mid-cap funds are an ideal investment option for investors looking for high return potential that comes with lower risk than their small-cap counterparts. Mid-cap funds are not very susceptible to volatility in broader markets, making it an ideal bet given that the macroeconomic conditions have generally offered a roller-coaster ride in recent years.
Meanwhile, when capital appreciation over the long term takes precedence over dividend payouts, growth funds become a natural choice for investors. These funds focus on realizing an appreciable amount of capital growth by investing in stocks of firms whose value is projected to rise over the long term.
However, a relatively higher tolerance to risk and the willingness to park funds for the longer term are necessary when investing in these securities. This is because they may experience relatively more fluctuations than other fund classes.
Below we share with you three top-rated mid-cap growth mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and we expect the funds to outperform their peers in the future.
Columbia Mid Cap Growth A (MUTF:CBSAX) seeks capital appreciation. CBSAX invests a major portion of its assets in companies that have market capitalizations in the range of the companies listed in the Russell Midcap Index. CBSAX invests in stocks that have the potential for long term, above-average earnings growth. The Columbia Mid Cap Growth A fund has a three-year annualized return of 9.5%.
CBSAX has an expense ratio of 1.19% as compared to the category average of 1.28%.
T. Rowe Price Mid-Cap Growth (MUTF:RPMGX) maintains a diversified portfolio by investing a large chunk of its assets in companies having market capitalizations similar to those listed in the S&P MidCap 400 Index or the Russell Midcap Growth Index. RPMGX invests in companies having above-average growth potential. Though RPMGX focuses on acquiring common stocks of domestic companies, RPMGX may also invest in companies located outside the U.S. The T. Rowe Price Mid-Cap Growth fund has a three-year annualized return of 13.4%.
Brian W.H. Berghuis is the fund manager of RPMGX since 1992.
MFS Mid Cap Growth Fund A (MUTF:OTCAX) seeks growth of capital. A large chunk of OTCAX's assets is invested in issuers having medium market capitalization. These issuers have a market cap identical to the ones listed in the Russell Midcap Growth Index for the previous 13 months. The MFS Mid Cap Growth A fund has a three-year annualized return of 11.1%.
As of February 2016, OTCAX held 103 issues with 2.59% of its assets invested in Ross Stores Inc. (NASDAQ:ROST).