What is there in flexi cap funds which is not there in multi cap, who is ahead in terms of returns 20

New Delhi. Choosing the right path in the world of investing is often a big challenge. In such a situation, flexi cap mutual funds have emerged as a “master key” that can open every door of the stock market for investors, be it the world of large-caps, the growing market of mid-caps or the explosive possibilities of small-caps. It is like tasting every flavor of the market in a single investment, and that is why investors are increasingly adopting it.

The real power of these funds lies in the hands of their fund manager, who gets complete freedom to change his strategy according to the mood of the market. When the market is bullish, he can increase investment in mid-cap stocks, and when the market is uncertain, he can protect the portfolio by investing money in large and stable companies (large-cap). This flexibility makes flexi cap funds a smart and time-tested investment.

What are Flexi Cap Funds and how do they work?

In simple words, flexi cap funds are a kind of all-in-one equity scheme. There is no restriction on which size of company to invest the money in. As per the rules, these funds have to invest at least 65% of their total assets in shares or equity related instruments. The remaining portion can be kept in safe options like cash or bonds to balance the risk.

Its fund manager is like a skilled driver, who decides the speed of the vehicle (investment) after seeing the condition of the road (market). If he feels that there is potential for growth in a particular sector, such as technology or healthcare, then he increases investment in that direction. Because of this, the portfolio of a flexi cap fund never remains the same, but constantly changes with market opportunities.

Key benefits of investing in flexi cap funds

• Strong Diversification: It works on the principle of “not keeping all the eggs in one basket”. Your money is divided among large, medium and small companies, so that the poor performance of any one sector or company does not have a major impact on your total investment.
• Flexibility: This is the biggest plus point of these funds. The fund manager has the freedom to invest where he sees opportunities. This quality helps them to reduce losses in market downturns and gain more profits in market upswings.
• Benefit of expert management: You do not need to worry about researching the market. A professional fund manager and his team do this work for you. They choose the right stocks for your money by analyzing the economy, companies’ performance and future prospects.

Flexi Cap vs Multi Cap Funds: What’s the big difference?

Many investors get confused between these two categories. The difference is very straightforward and important:

• Multi Cap Funds: A strict rule of SEBI applies to these. They always have to invest at least 25% of their total assets in large-cap, 25% mid-cap and 25% small-cap stocks. They cannot break this rule regardless of the market situation.
• Flexi Cap Funds: There is no such restriction on these. If the fund manager wants, he can invest 80% of the money in large-cap or 50% in mid-cap. Due to this complete independence, SEBI had introduced it as a separate category in November 2020.

Why might flexi cap funds be better for you?

If you are an investor who wants to earn good returns from the equity market but does not want to go through the headache of selecting stocks yourself, then Flexi Cap can be an ideal option for you. It is also best for those who want to invest for the long term and are not afraid of minor fluctuations in the market. By investing in a flexi cap fund, you become part of the entire market story from one place. You get the benefits of stability of large companies, momentum of mid-cap companies and growth potential of small companies simultaneously.

Know these things before investing

• This is an equity fund, so there is market risk in it. There may be fluctuations in it in the short-term.
• Keep your vision for at least 3 to 5 years. The possibility of better returns increases in the long term.
• Before investing in any fund, check its past performance, experience of the fund manager and expense ratio.