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Multi-cap funds have been around for a while. Earlier, these funds could invest in small, mid, and large-cap segments without any allocation restrictions. But, in September 2020, SEBI issued a new mandate which required such funds to invest at least a 25% stake in large, mid, and small-cap segments.<\/p>\n\n\n\n
Although this mandate ensured hedging, it took away fund managers\u2019 freedom to make allocations. To address these concerns, SEBI announced a new category called flexi cap mutual funds<\/a> in November 2020. The flexi cap fund’s meaning is simple; this category allows investing in small, mid, and large-cap segments without any percentage restrictions. The only restriction is that at least 65% of the fund\u2019s assets should be invested in equity, with no limitations on the market cap.<\/p>\n\n\n\n Both schemes are worth taking stock of. To do so, we must first learn how one is different from the other.<\/p>\n\n\n\n Multi-cap funds are mutual funds<\/a> that primarily invest in equity and equity-related stocks. They invest in a suite of companies with varying market capitalisations across small-cap, mid-cap, and large-cap. These funds offer the stability of large-cap stocks along with the growth potential of mid and small-cap stocks. They are ideal for investors seeking long-term growth and diversification in a single fund.<\/p>\n\n\n\n Flexi-cap funds are equity mutual funds with at least 65% allocation in equity and equity-related instruments. However, unlike multi-cap funds, flexi-cap funds do not have set proportions for large, mid, and small-cap stocks.<\/p>\n\n\n\n <\/p>\n\n\n\n – As an investor, if you can invest for a minimum period of five years, then both multi-cap and flexi-cap funds are suitable. However, one must be prepared for high risks that come with greater returns.<\/p>\n\n\n\n – Be familiar with your risk profile and select a scheme that fits your investment and financial goals. While fixing your investment tenure, plan your financial objectives and take into account possible risks.<\/p>\n\n\n\n – At the time of selecting your investment scheme, you will have two options – lump sum investments and Systematic Investment Plans (SIPs). SIP helps to mitigate the risks of volatile markets. The rupee-cost-averaging feature of SIP will compound your wealth in the long term. Choose an investment scheme suitable to your current financial condition and future goals.<\/p>\n\n\n\n It\u2019s no secret that both multi and flexi-cap mutual funds award investors an opportunity to invest across market caps. By doing so, they end up mitigating risks and generating higher returns for investors.<\/p>\n\n\n\n If you\u2019re looking to invest in one of these two funds, or start a fresh mutual fund portfolio, turn to Tata Capital Moneyfy. We offer a user-friendly portal to compare and apply for different investment instruments. With the Tata Moneyfy’s mutual fund investment app<\/a>, you can truly take your investment experience to the next level.<\/p>\n\n\n\nWhat are multi-cap funds?<\/strong><\/h2>\n\n\n\n
What are flexi-cap funds?<\/strong><\/h2>\n\n\n\n
Key differences between multi-cap funds and flexi-cap funds<\/strong><\/h2>\n\n\n\n
Differentiating parameters<\/strong><\/td> Multi-cap funds<\/strong><\/td> Flexi-cap MFs<\/strong><\/td><\/tr> Definition<\/td> A multi cap funds meaning is that – these funds invest in stocks across the market. They invest in small, medium, and large cap funds simultaneously. However, these funds have to invest 25% of their stake in large, mid, and small cap companies.<\/td> These funds also invest in stocks across the market. However, these funds allow investors to dial down their exposure to mid and small cap funds all the way to 0%.<\/td><\/tr> Degree of exposure to equity<\/td> These funds invest a minimum 75% stake in equities.<\/td> These funds invest a minimum 65% stake in equities.<\/td><\/tr> Market capitalisation range<\/td> These funds must invest a minimum of 25% stake in large, mid, and small stocks.<\/td> No such mandate exists on flexi cap MFs. These funds can invest wholly in large, mid, or small cap stocks.<\/td><\/tr> Allocation<\/td> A fund manager is free to distribute 25% of the stake in small, mid, and large cap stocks.<\/td> A fund manager is free to distribute 100% of the stake into small cap, mid cap, and large cap funds. Essentially, they can choose stocks and their cross-market capitalisation.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Things to note before investing<\/strong><\/h2>\n\n\n\n
Conclusion<\/strong><\/h3>\n\n\n\n