FLEXI CAP VS MULTICAP FUNDS
WHAT ARE FLEXI CAP FUNDS?
As per the guidelines of SEBI, a flexi cap funds scheme is an open ended dynamic scheme which is equity based and invests a minimum of 65% of its total assets in equity related instruments across small, mid and large cap stocks.
A flexi cap fund gives investors exposure to small, mid and large cap stocks through a single mutual funds scheme. Nevertheless, in a flexi cap fund, the fund managers have the flexibility to decide how much is to be invested in each asset class, without any minimum requirement of investment in each category. The investment in each category is managed as per the market situations.
WHAT ARE MULTICAP FUNDS?
As per the guidelines of SEBI, a multicap fund is open ended scheme which invests a minimum 75% in equity and related instruments across market caps such that:
- A minimum of 25% are invested in equity and related instruments of small cap companies.
- A minimum of 25% are invested in equity and related instruments of Mid cap companies.
A minimum of 25% are invested in equity and related instruments of large cap companies.
So a multicap mutual fund can give exposure to all market caps through a single scheme.
|Flexi Cap Funds||Multiple Cap Funds|
|Equity Exposure||Minimum 65% in equities||Minimum 70% in equities|
|Fund Manager Discretion||Fund managers have the freedom to choose across market cap and securities.||Fund managers have freedom but it is limited while choosing securities.|
|Market Cap Allocation||No mandate is there regarding this; here, the investment is made freely across market caps.||Minimum 25% each in small, mid and large cap stocks and rest as per manager’s discretion.|
WHY SHOULD YOU INVEST IN FLEXI CAP OR MULTI CAP FUNDS?
When an investor invests in a multi or flexi cap fund, they get exposure to various market caps companies. Each of them have their own benefits and merits. So in crux, these funds are a combination, potential of smallcaps, growth of midcaps and stability of large caps. So these funds create a win-win situation for investors.
To describe this a little, large caps have the potential to provide stability to the portfolio, mid caps can boost the gains, and small caps have the potential of giving extraordinary returns as they give higher risk.
CHOOSING BETWEEN FLEXI CAP FUNDS AND MULTI CAP FUNDS
Flexi and multi cap funds can give investors the exposure to all market caps in a single mutual fund scheme. Nevertheless, when it comes to opting between the 2 types of mutual fund schemes, it all depends on how much exposure an investor wishes to have in small, mid and large cap stocks.
If an investor wishes a minimum of 25% exposure to each - small mid and large cap stocks, they can opt to invest in a multi cap scheme. However, if they are good with the fund manager opting how much exposure to take towards different market cap shares and managing it dynamically as per the market scenario, investors can opt to invest in flexi cap funds.