Flexi Cap Fund is a mutual fund that allows investors to diversify their portfolios by investing in various market capitalizations. Offering diverse investment choices to the fund managers enables them to invest in stocks and shares that will generate higher income. In Flexi cap funds, the company size is not a concern as the manager’s primary focus is on the returns gained. If you also want to invest, let’s find out what is flexi cap fund and how do they work.
How do these funds work?
A flex cap fund enables investors to diversify their investment holdings among businesses with various market capitalizations, reducing volatility and risk. They are also known as multi-cap funds or diversified equity funds. Flexi-cap funds can invest in any firm regardless of the company’s market capitalization, unlike mid-cap or small-cap funds that concentrate on equities based on market capitalization. Regardless of their size, the fund manager evaluates each company’s growth prospects and distributes the funds among various industries and businesses.
Key Takeaways
- Flexi Cap fund is open-ended and is invested across the different market capitalizations
- Suitable for short term investment
- Make your portfolio diverse by investing in Flexi cap funds
- Balanced risk and profit as the money is invested in different capital companies
Benefits of Investing in Flexi Cap Funds
Like large-cap funds, small-cap and mid-cap funds, Flexi cap offers numerous opportunities and great returns. Previously, there was a multi-cap fund, where a 25-25-25 rule was followed, meaning at least 25% will be invested in large-cap, medium-cap, and small-cap funds.
Later, SEBI introduced the Flexi Cap Fund category, where investors were allowed to invest without any limit. Here are the top benefits you will get to enjoy upon investing in Flexi cap funds-
Make your portfolio diverse
We have already understood what is flexi cap funds, and how you can invest in different stocks/ shares regardless of the company’s market capitalization. If you invest in the flexi cap funds, you will get to diversify your portfolio and can handle the tumultuous journey of the equity market in the longer run.
Beat inflation
In the longer run, equity funds have a high potential to beat inflation. You will invest your money in a company now that the company has the money to run its operations and generate more revenue and business.
Higher returns
Now fund managers have the freedom to invest in any company regardless of its capital, and they can invest in stocks that offer higher returns. It can be a small-cap company, a large-cap or a medium cap. Also, there’s no limit on how much assets can be allocated to a particular fund, unlike multi-cap funds.
Features of Flexi Cap Funds
The following points talk about the features of Flexi Cap Funds:
- Enterprises of any market size, including large-cap, mid-cap, and small-cap companies, may be invested in through Flexi-Cap Funds
- A Flexi-cap Fund must allocate at least 65% of its assets to equities and securities connected to equity.
- Contrary to multi-cap funds, there is no entry-level investment requirement.
- With a Flexi-cap Fund, the fund manager has more freedom to investigate investment opportunities.
Things To Keep In Mind Before Investing in Flexi Cap Funds
Making a decision to invest in any mutual fund requires a lot of consideration. It would be best if you weigh various factors before deciding, or you may lose the money drastically. Here are some of the points you should consider before you plan to invest in a flexi cap fund or any fund.
Past performance
You should check the previous performance of the fund you are planning to invest in to ensure it has been consistent throughout. However, many fund managers take a conservative approach where they invest major assets in the large-cap companies and allocate the rest of the assets in the mid-cap mutual funds and small-cap mutual funds.
Returns
You also need to know how many returns each fund gives to the investors. This will give you an idea about the returns you will receive upon investment in flexi cap funds. Though this is your fund manager’s share of work, you need to keep a tab on it to know that you are not making a blunder.
Investment period
It’s important to determine how many years you are planning to invest. In an ideal scenario, you should invest for at least 5 years as the flexi cap fund tends to have a higher allocation towards the small-cap and mid-cap stocks.
Who Should Invest in Flexi Cap Funds?
A flexi cap fund is ideal for conservative investors looking for flexibility and freedom to invest across the market. As an investor, you need to have a minimum risk appetite, considering you will be investing across different market caps. Also, if you can invest for a minimum of 5 years.
Taxation of Investing in Flexi Cap Funds
In flexi cap funds, the capital you will gain is taxable. The tax will be determined depending on your investment period. There are short-term capital gains and long-term capital gains tax applicable on the investment and returns you will receive.
The profit gained within 12 months of investment is counted under short term capital gains and will be taxed at 15%, whereas the profit gained after 12 months of investment will fall under the long term capital gains. The LTCG gets an exemption up to Rs. 1 lakh and will be taxed 10% on balance regardless of indexation.
Top Flexi Cap Funds to Look Out For
Here are the top Flexi cap funds to invest in 2022 as per the news reports-
- Parag Parikh Flexi Cap Fund
- UTI Flexi Cup Fund
- PGIM India Flexi Cap Fund
- Aditya Birla Sun Life Flexi Cap Fund
- SBI Flexi Cap Fund
- Canara Robeco Flexi Cap Fund
Difference between Flexi Cap vs Multi Cap Funds?
| Flexi Cap Funds | Multi Cap Funds |
| An open-ended, dynamic equity program is called Flexi-Cap Fund. It makes investments in businesses with any market capitalization. Specifically, large, midsize, and small-cap firms. A Flexi-cap Fund must allocate at least 65% of its assets to equities and securities connected to equity. Unlike multi-cap funds, large, mid, and small cap investments do not require a minimum investment amount, and exposure can be controlled dynamically. By chasing value and growth, a flex-cap fund gives its fund management more freedom to investigate investment opportunities across large-, mid-, and small-cap firms. | This equity-oriented fund’s goal is to maintain a diversified portfolio of large, mid-cap, and small-cap corporations, as the name would imply. A Multi-cap Fund is required by law to invest at least 75% of its total assets in stocks in the following ways: at least 25% in large-cap firms; a minimum of 25% in mid-cap firms; at least 25% in small-cap firms It is necessary for a multi-cap fund to keep its equity allocation regardless of the state of the market. With the stability of large-caps and the high-return potential of mid-caps and small-caps, you get the best of all worlds. The fund manager’s ability to change the allocation to a certain market capitalization category is limited. However, if the large-cap portfolio is strong, it might provide some stability. The majority of multi-cap funds typically hold the majority of their equity holdings in mid-cap and small-cap companies, with a tilt toward large-caps. |
Conclusion
In conclusion, after all the discussion and facts, you now know what is flexi cap fund. You will get great returns, diversify your portfolio, lower the risk, and get a lot of money in, like, what, 5 or 10 years.
No wonder if you take assistance from a fund manager or a mutual fund house and invest in the shares with a higher return, you can make more money than you can imagine. It is like a genie’s lamp; if you get the right one, a genie will grant you three wishes, and you can become the king of the world; if not, well, let’s not go down that road, shall we?
Frequently Asked Questions
These flexi cap funds are rated based on returns, past performance, current record, performance in the last three years, the risk involved, and the asset size invested.
As an investor, it will help you diversify your portfolio, get higher returns, and lower the risk of losing money. You will be free to invest your asset in large-cap, mid-cap and small-cap funds and lower the risk of losing money as small-cap and mid-cap are highly volatile.
Suppose you are planning to invest in the large-cap fund and the small and medium cap to ensure you get high returns and low risk, similar to a conservative investor. In that case, a flexi cap investment is the most suitable option for you.
If you have an idea about the share market and have prior experience, you can dive in on your own, but if you have no idea, hiring a fund manager is a suitable option. The fund manager will conduct the fundamental research, allocate your money in the right place and help you get better returns.
Flexi-cap funds are a solid strategy because, in tumultuous stock markets, large-caps have superior liquidity and stability than mid-caps and small-caps. Large-cap firms are more prevalent in these funds due to their established status and better risk-adjusted return.
Flexi mutual funds can select the proportion of large, midsize, and small cap stocks as they see suitable. Multi-cap funds, on the other hand, are required to maintain a minimum threshold of 25% in each of the three fund types. When this distinction was made following the implementation of SEBI guidelines, a number of mutual funds in the multi cap category switched to flexi cap. Since many AMCs have yet to introduce fund schemes in the multi cap sector, it is still very open.
UTI Flexi Cap Fund, Canara Robeco Flexi Cap Fund, DSP Flexi Cap Fund, Franklin India Flexi Cap Fund, and HDFC Flexi Cap Fund are a few of the greatest flexi caps.
Flexi-cap funds are equity funds that allocate at least 65 per cent of their assets to equities and securities with an equity component. They can invest across market capitalization without any restrictions, and they are allowed to have exposure to large-, mid-, and small-cap stocks.
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