The profit margin of all my midcap funds has fallen from 15 per cent to around 5 to 6 per cent. Should I wait or shift my investment to multicap funds?
I don't know what your reference point is, especially when your profit margin has dropped. Usually, in midcaps your allocation should be there for at least 5 to 10 years. But if you are worried and would be stressed if your profit margin further drops or goes into negative, then you should keep things simple and invest the money in two or three multicap funds. Multicaps have largecap, midcap and also smallcap. You should also look at it from a different perspective by checking when you would need this money and then analyse what part of your complete portfolio is invested in midcaps.
Another thing which would matter is that whether it is an accumulated portfolio or a building portfolio where you would continue to contribute. If it is a building portfolio and you would continue to contribute, then I think you should continue with your investment in midcaps. But if it is an accumulated portfolio where you won't be contributing any further, then it would be better to simplify things and invest in multicap funds.
See, I am confident that equity would give good returns in the next 3-5 years. But I don't know how will it perform over the next 6 months or 1 year. The volatility will be there in short term. Also, in midcaps, after the kind of return they gave in 2016, this kind of a fall looks normal. But if someone, invested for the first time in early 2017 and saw them falling straight after six months, it would be worrisome for them as they might not be used to it. Always remember that midcaps would giver higher return over long term, and smallcaps would give even higher. But whenever there is fall, they fall sharply.