Flexi-cap vs Multi-cap: What’s driving the investors’ shift?

Date : 31/08/2023
Read: 3 mins

Are multi-cap funds the better investment option than flexi-cap funds? Read this article to find out why investors are making the switch.

If you are an investor who likes to diversify your portfolio across different market segments, you might have heard of flexi-cap and multi-cap funds. These are two fund categories that invest in companies of various sizes, from large to small. But did you know that in the last 3 months, investors have been buying multi-cap funds and selling flexi-cap funds? What’s the reason behind this shift, and which fund is better for you? In this article, we will explore the factors that influence the performance of these funds, and how you can make the most of them.

Highlights:

Investors shifting from flexi-cap to multi-cap funds
Flexi-cap funds offer flexibility and diversification
Multi-cap funds follow a balanced approach
Flexi-cap funds lost Rs 1,317 crore whereas multi-cap funds gained Rs 3,340 crore
Flexi-cap funds manage market volatility better

Also Read: What is a multi cap fund? How is it different from Flexi cap funds? Where should you invest?

When choosing between flexi-cap and multi-cap funds, investors should carefully consider their investment goals, risk appetite, and time horizon. Multi-cap funds offer the potential for higher returns but also carry more risk, while flexi-cap funds offer lower risk but may not offer as high returns. It is important to remember that the past performance of these funds is not a guarantee of future returns and that the market is volatile. Investors should invest for the long term and not panic sell if the market goes down

Flexi-cap funds vs multi-cap funds

Flexi-cap and multi-cap funds are equity funds that invest in companies of different sizes. Multi-cap funds have to invest at least 25% in each of the large, mid, and small-cap stocks, while flexi-cap funds have no such restriction. Flexi-cap funds offer more flexibility and diversification, while multi-cap funds follow a more balanced approach. Both funds are riskier than large-cap funds, but may offer higher returns.

The latest investment trend

In recent months, flexi-cap funds lost Rs 1,317 crore while multi-cap funds gained Rs 3,340 crore. Rushabh Desai from Rupee with Rushabh Investment Services sheds light on the differing trends, guides market volatility management, and unveils vital considerations for choosing between flexi-cap and multi-cap funds. These vital considerations are mentioned below:

Multi-cap funds invest 25% each in large, mid, and small-cap stocks; flexi-cap funds have no such limit
Multi-cap funds are riskier than flexi-cap funds, but may offer higher returns
Large-cap stocks provide stability, while mid- and small-cap stocks offer growth potential
Flexi-cap funds can manage market volatility better, as they have more flexibility
Both fund categories require a long-term horizon of at least five years for lump-sum and seven years for SIP investments
Multi-cap funds have seen more inflows due to the recent NFOs in the segment