How to select good mid-cap and small-cap stocks for your portfolio without trying too hard

We are living in an age of instant gratification. No one has the time or patience to brew a nice cup of filter coffee. Too much hassle. Just go to the nearest coffee bar and pay through your nose; or, boil a cup of water and stir some instant coffee in it.

Want to buy a car? No need to save MONEY for 10-15 years. Just go to a car dealer, show your income statement or tax return, pay a token lump sum amount and drive out in a shining new 4-wheeler, and then pay nearly double the cost of the car through monthly EMIs.

Want to enter the STOCK market? Just open a demat account and a TRADING account with a large broker or bank, and start buying the next Infosys and the next L&T being discussed in stock forums or business TV channels. Instant gratification doesn’t quite work in this case, does it? Where are the huge returns that every one seems to talk about?

Instant gratification usually ends up costing you much more – in terms of money, health, stress. If you are really interested in fabulous returns from the stock market, there is only one way out. Learning to do things the proper way – which means spending time and being disciplined and patient. Easier said than done for most people, who work hard, live fast and prefer to go for vacations at Langkawi or Nice.

If you neither have the time, nor the inclination to learn how to select good STOCKS – a process that requires learning how to read an Annual Report, calculating financial ratios, studying economic conditions in the country and overseas, supply and demand in various industrial and service sectors, and observing different patterns on price charts – here is a simpler process.

Select the top-ranked (by 5 yr returns) mid-cap and small-cap FUNDS listed at valueresearchonline.com and check their top 10 equity holdings. The hard work has already been done for you. Just go through the table below.

Religare Invesco Mid N Small Cap	BNP Paribas Midcap	Franklin India Smaller Companies	ICICI Prudential Value Discovery
Brittania	VA Tech Wabag	Finolex Cables	ICICI Bank
DB Corp	Idea Cellular	Yes Bank	Reliance Ind
Gateway Distripark	Axis Bank	Repco Home Fin	Sadbhav Engg
ING Vysya Bank	HPCL	JK Lakshmi Cement	PI Industries
Federal Bank	Yes Bank	Mindtree	Exide
Redington	IndusInd Bank	Cyient	Mindtree
Guj Pipavav Port	OIL India	Amara Raja	Amara Raja
City Union Bank	Alembic Pharma	SKF India	Guj Pipavav Port
AIA Engineering	Orient Cement	Axis Bank	Balkrishna Ind
Greaves Cotton	Motherson Sumi	Aegis Logistics	Max India

Leaving aside a few large-caps like ICICI Bank and Reliance Ind, the rest are a representative sample of good mid-cap and small-cap stocks. So, here are two things you can do:

1) Select a few stocks from the four FUNDS and add them to your portfolio. Choose the ones whose businesses you understand to a certain extent. Alternatively, choose stocks that are appearing in more than one fund – like Amara Raja, Mindtree, Axis Bank and Yes Bank.

2) If you are really pressed for time (or lazy), start a SIP in any one of the four FUNDS. Each of these funds has returned about 25% for the past 5 years. That indicates a consistency of performance over the long-term.