Flexi Cap Fund is a mutual fund that allows investors to diversify their portfolios by investing in companies of all sizes and sectors. Offering diverse investment choices to the fund managers enables them to invest in stocks and shares that will generate higher income.
Let’s learn about the Flexi Cap Fund meaning, features and benefits along with the best flexi cap funds in India.
Best Flexi Cap Funds in India, 2023
The following are some of the best flexi cap mutual funds currently available in India:
| Flexi Cap Funds | Risk Involved | Net Assets (Cr.) |
| HDFC Focused 30 Direct Fund | Very High | 3,000 |
| HDFC Flexi Cap Direct Fund | Very High | 32,894 |
| Franklin Ind. Focused Equity Direct Fund | Very High | 8,656 |
| Mahindra Mnulife Focused Equity Yjn. Direct | Very High | 656 |
| Quant Flexi Cap Direct Fund | Very High | 825 |
Flexi Cap Funds: How do they work?
A flexi 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.
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 are the defining features of Flexi Cap Mutual Funds:
- Enterprises of any market size, including large-cap, mid-cap, and small-cap companies, may be invested in through Flexi-Cap Funds
- Contrary to multi-cap funds, there is no entry-level investment requirement
- Fund manager has more freedom to investigate investment opportunities
Flexi Cap Funds: Things to Consider
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 you if you are a:
- first time investor
- conservative investors
- looking for long-term investment
- looking for both mid cap and small cap exposure
Taxation of Investing in Flexi Cap Funds
In mutual funds, the returns you gain are called as capital gains and are classified into short term capital gains and long term capital gains. The tax will be determined depending on your investment period.
Short Term Capital Gain Tax or STCG Tax: 15% tax applicable if you sell your investments within 1 year
Long Term Capital Gain Tax or LTCG Tax: Capital gains up to Rs 1 lakh from investments of more than 1 year are exempt from tax. After Rs 1 lakh, there is 10% tax applicable.
Flexi Cap Fund
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.
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.
HDFC Focused 30 Direct Fund, HDFC Flexi Cap and Franklin India Focused Equity Direct Fund are some of the top flexi fund options available in India.
Flexi-cap funds are equity funds that allocate at least 65% 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.
Also Read: Post Office RD Interest Rate
