Flexi-cap funds explained: If you are looking for flexibility for your fund manager to allocate money across large caps, mid caps and small caps, then flexi funds may be the way to go. But, let’s first understand what flexi cap funds are:
With a surge in new investors showing interest in mutual funds as stock markets reach record highs, financial planners are recommending flexi cap funds as a suitable starting point.
Flexi cap funds offer the flexibility to invest in companies of varying market capitalizations, including large-, mid-, or small-cap, without any constraints. Flexi cap funds are categorized as open-ended, dynamic equity mutual fund schemes, allowing fund managers the liberty to invest across companies of all market capitalizations without limitations.
Unlike other fund categories that have fixed allocation requirements, flexi cap funds mandate a minimum of 65% investment in equity and equity-related instruments. Financial advisors advocate for flexi cap funds due to the freedom they provide to fund managers in company allocation, in contrast to the restricted mandates of large cap, mid cap, small cap, and multi cap funds.
Schemes focusing on large cap, mid cap, small cap, and multi cap have predetermined mandates, compelling them to adhere to specific categories of companies within their portfolio.
For instance, a large cap fund is mandated to invest a minimum of 80% in companies ranked 1 to 100 by market capitalization, while a mid-cap fund must allocate at least 65% of its portfolio to companies ranked 101-250 by market capitalization. This structure aids numerous investors who frequently grapple with decisions regarding whether to choose large cap, mid cap, small cap, multi cap, or sectoral funds.
Flexi cap funds are recommended for long-term or first-time investors seeking a hassle-free approach to Indian equities without the need for individual stock selection. Investors aiming to diversify their portfolio with exposure to top companies regardless of market capitalization, to mitigate risk and volatility, and achieve long-term wealth accumulation, can benefit from flexi cap funds.
Additionally, investors interested in systematic investment plans (SIP) to stagger their investments may find flexi cap funds a suitable option.
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