I have been reading quite a bit information on asset allocation, and all I have read so far talks about dividing among large cap, large cap value, small cap, small cap value, and foreign funds and so on. Does that mean one should skip mid cap funds? Reason I'm asking is that my 401K plan has mid cap fund in it.

should mid cap funds be avoided? Thanks.

No, it does not mean that you should avoid mid caps. Many of the programs that have been developed to create asset allocation models were built without including mid caps and therefore you rarely see them in the models. This might be because the thought was that by investing in large and small caps you could achieve the same objective as a mid cap. Some programs are now being altered to include mid caps. You also see this with Large Value, Growth and Blend. Most allocation models do not include blend funds, which are made up of both value and growth stocks. If your plan has a Financial Advisor assigned then I would suggest that you talk with that person. If not there are many websites that contain information on investing in mutual funds that will allow you to research the options in the plan and make an informed decision.