Flexi Cap Fund, sometimes referred to as flexible-cap funds, are a class of mutual funds that invest in businesses of all sizes and industries to provide a varied investment portfolio. Flexi cap funds are free to invest in large-cap, mid-cap, or small-cap companies, subject to market conditions and the fund manager’s discretion. This is in contrast to other mutual fund categories that have limitations on the market capitalization of the companies they invest in.
What is the Flexi Cap fund?
A Flexi cap fund makes flexible investments primarily in the equity and equity-related securities of businesses ranging in market capitalization. The fund manager can aim for higher returns because no single market capitalization segment has consistently outperformed the markets thanks to this flexibility in investing across various market segments.
To facilitate investor identification of funds that possess inherent flexibility for cross-segment investment, SEBI has required mutual funds to maintain scheme and fund category names identical. This is consistent with every scheme.
Who Should Invest in Flexi Cap Funds?
- Investors who seek portfolio diversification.
- If you intend to make a single-fund investment.
- Those who intend to invest for a long time—ideally longer than five years. A great place to invest for long-term objectives like retirement, college for your children, etc. is in flexi-cap funds.
- Investors who favor growth over dividends in their investment decisions. Only the growth option is available in many fund houses’ Flexi-cap Funds. Therefore, people looking for a consistent income from mutual funds may find that Flexi-cap Funds are not the best option.
Factors to Consider While Investing in Flexi cap Funds
- Cost: Fund houses have costs associated with managing mutual funds. The term “expense ratio” refers to this ratio, which shows these costs as a percentage of the Asset Under Management (AUM). Fund houses release Flexi-cap Fund NAVs following expense deduction. Purchase a Flexi-cap Fund with a lower expense ratio as a result.
- Risk: Returns and risk are mutually exclusive. Before investing in a Flexi-cap fund, research the fund’s risks and determine whether or not they align with your risk tolerance.
- Fund manager’s experience: One important factor influencing the returns is the fund manager’s experience. Check the fund’s performance that the manager previously oversaw as a result. It can provide a clear indication of how capable she or he is of handling the money.
- Track record of the fund house: When choosing mutual funds, attempt to choose those provided by established investors rather than those that are brand-new and unproven.
Benefits of Investing in a Flexi Cap Mutual Fund
- Portfolio stability: You are exposed to dependable, well-established large-cap firms that have experienced several business cycles. When markets get erratic, they can assist you in supporting the downside of your portfolio and typically have steady earnings growth.
- Portfolio growth: Additionally, you will have the chance to profit from the high growth potential of mid-cap and small-cap firms that are either just starting or do not yet have a track record of success.
- Portfolio diversification: The portfolio’s distribution across market capitalizations provides you with the chance to diversify your holdings and efficiently control risk and return.
Features of Flexi Cap Funds
- Diversified Portfolio: To provide a good level of diversification, flexi-cap funds allocate capital to equities with a range of market capitalizations. You can invest in large-cap, mid-cap, and small-cap companies across various industrial sectors by purchasing a single Flexi-cap fund.
- Dynamic Portfolio Management: The management of flexi-cap funds is dynamic. Fund managers modify the allocation of assets to capitalize on prospective advantages.
- No Capitalization Threshold: Flexi-cap funds are exempt from these capitalization limitations under SEBI guidelines, which allows fund managers greater latitude in constructing and modifying portfolios.
- Open-Ended Scheme: Since Flexi-cap funds are open-ended equity schemes, there is no lock-in period or fixed maturity for them. Any Flexi-cap scheme you choose can accept a lump sum investment or the start of a Systematic Investment Plan (SIP), with the option to redeem the investment as needed.
With a diversified portfolio actively managed by knowledgeable professionals, flexi cap funds give investors the freedom to take advantage of opportunities throughout the market spectrum. It is advisable for prospective investors to thoroughly evaluate their investment objectives and risk tolerance before making any decisions regarding these funds. To make well-informed investment decisions that support personal financial goals, speaking with a financial advisor or carrying out in-depth research is advised.