Flexi-cap mutual funds are those investment schemes that invest in securities across all market caps. These belong to the mutual fund segment that comprises 11 other categories such as mid-cap funds, large-cap funds, small-cap funds, multi-cap funds, value funds, sectoral funds, and ELSS. With 38 Flexi-cap mutual funds managing a total Assets Under Management (AUM) of Rs 3.27 lakh crore, this category has become quite popular among investors.
Read on to learn more about the growing popularity of Flexi cap equity funds among investors and why.
5 Reasons For Choosing Flexi Cap Funds for Investment
A Flexi-cap equity mutual fund is a kind of mutual fund that invests in companies belonging to all market caps i.e., small-cap, mid-cap, and large-cap. According to SEBI guidelines, Flexi-cap funds have to maintain a minimum of 65% of their portfolio in equity and other similar instruments.
Unlike traditional equity funds, fund managers have the liberty to adjust allocations according to market conditions.
Before investing in the stock market in any form, you need to understand your financial goals. Here are 5 essential reasons for choosing Flexi-cap equity mutual funds for investment purposes:
1. Exposure to Multiple Sectors
Investors get broad exposure to multiple sectors as Flexi-cap funds invest across a wide range of industries. This reduces the overall risks of an investor as there is no or little dependence on a single sector.
For example, the Motilal Oswal Flexi cap fund is resilient owing to its investment in high-growth sectors like technology. However, it remains stable due to investment in established sectors like banking, finance, FMCG, and so on.
2. Promising Long-Term Returns
Since Flexi-cap mutual funds invest in companies of all sizes, investors can select funds with strong growth potential. Investment can be made in emerging and established companies depending on the market condition. This supports consistent wealth creation as there are plenty of sectors that a fund can select and offer long term growth.
3. Convenient Portfolio Adjustment
Depending on market trends, a fund manager shifts investments conveniently in a flexi cap fund. Timely adjustments optimize a portfolio as an investment can be easily adjusted among large-cap, mid-ca,p and small-cap stocks.
Owing to certain tax changes, these funds have now become more attractive for higher tax bracket investors. Flexi-cap mutual funds are now more tax-efficient as compared to full-fledged international funds and debt funds as they are treated as equity funds.
4. Balances Growth Stability
While large-cap stocks ensure steady returns because of low volatility, mid-cap and small-cap stocks enable growth. Since investment can be spread across multiple sectors and among various companies of various sizes, the risk is reduced. Fund managers can diversify their portfolios as all kinds of market segments can be invested in which balances rewards and risks.
5. Professional Fund Management
Flexi-cap mutual funds are handled by expert fund managers. These professionals analyze market trends and keep track of essential performance metrics of underlying stocks so that they can make informed decisions. Their main aim is to mitigate potential risks and conduct thorough market research to survive market downturns.
Conclusion
Fund management and diversification make Flexi cap mutual funds an attractive investment option. Flexi-cap funds balance growth and offer stability making it an option for a wide range of investors. The dynamic nature of these mutual funds allows long-term wealth creation and a balanced portfolio.
