Flexi Cap Funds and Multi Cap funds are similar but not the same. Both have certain basic features in common, but their investing strategies are totally different.
While both types of funds offer the potential for growth and income, they differ in the way they invest & level of risk they carry.
In this article, we will compare and contrast flexi cap & multi cap funds to help investors understand the key differences between both investment options.
What is Flexi Cap Fund?
Flexi Cap Fund is a mutual fund that allows the Fund Manager the flexibility to invest across different companies and sectors, without any predefined investment allocation based on market capitalization.
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This type of fund allows the fund manager to adjust the portfolio as market conditions change, potentially providing opportunities for growth & income.
What is Multi Cap Fund?
Multi Cap fund is a mutual fund that invests in a mix of large, mid, and small cap companies, with equal investment allocations across each market capitalization.
This type of fund aims to provide diversification across different types of stocks and potentially reduce risk in the portfolio.
Multi cap funds are required to invest at least 75% of their assets in equity and equity-related instruments in order to cater to all three market capitalizations.
| Flexi Cap Fund | Multi Cap Fund | |
|---|---|---|
| Equity Exposure | Minimum 65% in equities | Minimum 75% in equities |
| Portfolio Allocation | Invest across cap, no mandate for min allocation | Min 25% each in large, mid & small cap |
| Flexibility | Flexibility to determine asset allocation as per market trend | Limited Flexibility |
| Objective | Diversification | Diversification with discipline |
| Market Cap Bias | Flexible allocation across market cap | Min 25% each in large, mid & small cap |
| Benchmark | Nifty 500 TRI | Nifty 500 Multicap 50:25:25 |
Investment Strategy
Flexi Cap Funds have the flexibility to invest across market capitalizations, with no predetermined investment allocation based on market cap.
The fund manager has the ability to adjust the portfolio as market conditions change, potentially providing opportunities for growth.
Flexi cap funds may also invest in a variety of sectors, giving the Fund Manager the ability to adjust the portfolio based on the sectors that are performing well at any given time.
Multi cap funds follow an investment strategy that involves investing in a mix of large, mid, & small cap stocks, with equal allocation of investments in each market capitalization.
The goal of this strategy is to provide diversification across different types of stocks and potentially reduce risk in the portfolio.
Suitability for investors
When deciding between a multi cap and flexi cap fund, investors should consider their risk tolerance and financial goals.
Multi Cap Funds, with their diversified portfolio of large, mid, & small cap stocks, may be suitable for investors who are seeking a balance of growth, but who also want to mitigate risk through diversification.
On the other hand, Flexi Cap Funds may be suitable for investors who are willing to take on a higher level of risk in exchange for the potential for higher returns.
The flexible investment strategy of Flexi Cap Funds may allow for greater opportunities for growth, but it also carries the risk of increased volatility in the portfolio.
Risk & Returns:
Risk profile of a mutual fund is an important factor to consider when deciding which fund to invest in.
Multi Cap Funds, with their diversified portfolio of large, mid, & small cap stocks, tend to have a moderate level of risk. This is because the fund is spread across different types of stocks, which can potentially reduce the overall risk in the portfolio.
Flexi Cap Funds may have a higher level of risk due to their flexible investment strategy.
The fund manager has the discretion to invest in a wide range of companies and sectors, which can potentially lead to higher returns but also carries the risk of increased volatility in the portfolio.
When it comes to potential returns, both Multi Cap & Flexi Cap Funds have the potential to generate income and growth.
However, the specific returns of a particular fund will depend on the performance of the individual investments within the portfolio.
It is important for investors to carefully review the fund’s track record & consider the potential risks & returns before making a decision to invest.
Conclusion
When deciding between a Multi Cap & Flexi Cap Fund, investors should consider their risk tolerance and financial goals. It is important for investors to carefully review the track record & investment strategy of a fund before making a decision to invest.
Further research and seeking the advice of a financial advisor may also be helpful in determining the suitability of a particular fund for an individual’s portfolio.
