Mid cap funds invest in companies ranked 101-250 by market capitalization, offering higher growth potential than large cap funds while managing risk better than small cap funds. They typically have higher volatility than large cap funds but lower than small cap funds, with strong growth potential and diversification benefits.

Choose mid cap funds based on consistent performance track record, strong risk management and volatility control, experienced fund management team, reasonable expense ratios, and optimal AUM size. Consider funds with good long-term performance, strong risk-adjusted returns, and consistent performance across different market cycles.

For growth investors, allocate 20-30% of equity portfolio to mid cap funds. For balanced investors, 15-25% allocation is appropriate. For conservative investors, 10-15% allocation is sufficient. Diversify across 2-3 quality mid cap funds to reduce concentration risk. Consider your risk tolerance and investment horizon while deciding allocation.

Manage volatility by diversifying across multiple mid cap funds, using systematic investment approach for rupee cost averaging, maintaining long-term investment horizon, monitoring fund performance regularly, and adjusting allocation based on market conditions. Consider systematic withdrawal during extreme volatility periods.

Key risks include higher volatility compared to large cap funds, market cycle sensitivity and performance variations, liquidity concerns during market stress, company-specific risks and concentration, and economic sensitivity and growth dependence. Diversification and risk management are crucial for successful mid cap fund investing.