Are you looking for a mutual fund that offers you the flexibility to invest across different market capitalizations and sectors? Look no further than the Flexi Cap Fund!
These funds have been gaining popularity as an investment option due to their flexibility and diversification. As the name suggests. this versatile fund provides investors with the benefits of diversification, active fund management, and the potential for higher returns while also minimizing risks.
In this blog, we’ll dive deep into the features, benefits, and factors to consider before investing in Flexi Cap Funds. Moreover, we will also highlight the popular flexi cap funds wherein you can invest in 2023. Let us now learn what are flexi cap funds.
What is a Flexi Cap Fund?
A Flexi Cap Fund is a type of mutual fund that invests in stocks across different market capitalizations. It gives the fund manager the flexibility to invest in companies of any market capitalization, i.e., large-cap, mid-cap, or small-cap, depending on the prevailing market conditions.
The fund’s objective is to provide capital appreciation to investors over the long term by investing in a diversified portfolio of stocks. Flexi Cap Funds are suitable for investors who seek higher flexi cap fund returns than large-cap funds and lower risk than mid-cap and small-cap funds. The flexibility to invest in different sectors and market capitalizations provides diversification benefits to investors. Now that we know what is flexi cap mutual fund, let’s look at some features.
Types of Flexi Cap Funds
Flexi Cap funds are a versatile investment option that allows fund managers to invest across various market capitalizations, from large-cap to mid-cap and small-cap stocks. While Flexi Cap funds, by nature, are highly flexible, they can be categorized based on the way they are offered to investors. The two primary categories of Flexi Cap funds are:
- Direct Flexi Cap Funds: These funds are available directly through the asset management company (AMC) or its website. Investors can invest in Direct Flexi Cap funds without involving intermediaries like brokers or distributors. This often leads to lower expense ratios, potentially resulting in better returns over time.
- Regular Flexi Cap Funds: Regular Flexi Cap funds are sold through intermediaries such as mutual fund distributors or financial advisors. While these intermediaries provide services and guidance to investors, they typically earn commissions from the fund house, which can result in slightly higher expense ratios for regular funds.
Investors can choose between Direct and Regular Flexi Cap funds based on their preferences and whether they prefer a self-directed approach or seek professional advice. Both types of funds offer the same underlying investment strategy, and the choice between them primarily revolves around the cost structure and the level of investor involvement.
Features of a Flexi Cap Fund
Flexi Cap Mutual Fund offers investors the flexibility to invest in companies across different market capitalizations and sectors. Some significant features of the best flexicap funds are as follows:
- Diversification: Flexi Cap funds invest in companies across market capitalizations and sectors, thus providing diversification to the investor’s portfolio.
- Flexibility: Flexi Cap funds have the flexibility to invest in companies across market capitalizations and sectors, allowing the fund manager to take advantage of opportunities across the market.
- Investment in different sectors: The best flexicap mutual funds invest in companies across different sectors, allowing investors to gain exposure to a broad range of industries.
Popular Flexi Cap Funds in India
|Popular Flexicap Funds in India||AUM|
|Parag Parikh Flexi Cap Fund – Direct-Growth||₹31,290 Crores|
|Quant Flexicap Fund Growth Option Direct Plan||₹1,334 Crores|
|HDFC Flexi Cap Fund – Direct Plan – Growth Option||₹31,893 Crores|
|PGIM India Flexi Cap Fund||₹5,457 Crores|
|Edelweiss Flexicap Fund Growth||₹1,074 Crores|
|Canara Robeco Flexicap Fund||₹8,713 Crores|
|Navi Flexicap Fund||₹208 Crores|
|Kotak Flexicap Fund||₹37,217 Crores|
|SBI Flexicap Fund Growth||₹15,693 Crores|
|DSP Flexicap Fund||₹7,572 Crores|
How to Invest in a Flexi Cap Fund?
Flexi Cap Funds have become increasingly popular among investors due to their ability to invest in a diversified portfolio of stocks across market capitalizations. Investors can invest in Flexi Cap Funds through various methods:
Investors can invest in Flexi Mutual Funds directly by visiting the website of the fund house and following the steps for investment. This method allows investors to invest in the fund without the need for intermediaries.
Investors can also invest in Flexi Cap Mutual Funds in India through brokers or financial advisors who provide investment advice and guidance. Brokers charge a commission or fee for their services.
Through Online Investment Platforms
Several online investment platforms offer the facility to invest in Flexi Cap Funds. These platforms provide a user-friendly interface and allow investors to invest in the fund of their choice with just a few clicks. They also offer features such as portfolio tracking, research reports, and expert recommendations. These platforms charge a fee for their services.
Example of a Flexi Cap Fund
Flexi Cap Funds are known for their flexibility in terms of asset allocation. They offer a unique advantage by allowing fund managers to invest across various market capitalizations, from large-cap to mid-cap and small-cap stocks. Here’s an example of how this flexibility can be advantageous:
Imagine a scenario where the market dynamics are shifting. Large-cap stocks, which were performing well, suddenly face challenges, while mid-cap and small-cap stocks start showing growth potential. In a rigidly structured fund, the manager might be restricted to investing in a particular market cap category. However, with Flexi Funds, the manager can swiftly reallocate the portfolio to capture opportunities in the evolving market, maximizing returns and managing risks effectively.
Flexi Cap Funds provide investors with the benefit of adapting to changing market conditions and capitalizing on emerging trends. This versatility is a key reason why many investors find them appealing, as they offer a diversified approach to navigate the ever-changing investment landscape.
Benefits of Investing in a Flexi Cap Fund
Flexi Cap Funds offer several benefits to investors, including:
Flexi Cap Funds invest in a mix of large, mid and small-cap stocks, providing a diversified portfolio that can potentially generate higher returns than other funds that are restricted to specific market segments.
The diversification offered by Flexi Cap Funds helps reduce the risk of investment losses as compared to single-segment funds such as Small Cap Funds or Mid Cap Funds. Additionally, the fund manager has the flexibility to shift the portfolio allocation depending on market conditions, which helps to reduce overall investment risk.
Active Fund Management
Flexi Cap Funds are actively managed by a professional fund manager who uses his expertise to select the best flexi cap mutual funds to invest in 2023 and adjust the portfolio as per the market conditions. The fund manager regularly monitors the market trends and adjusts the fund’s asset allocation to ensure that it remains aligned with the investment objectives of the fund. This active fund management helps to generate better returns and mitigate risks.
Limitations of Flexi Cap Funds
Flexi Cap Funds offer versatility and growth potential, but like any investment option, they come with their own set of limitations. Here are the key constraints to consider:
Flexi Cap Funds provide fund managers with the flexibility to invest across various market segments. While this can be an advantage, it also means that fund managers have significant discretion in asset allocation. Depending on their outlook, they can switch between segments. This may result in varying risk levels and returns.
Differing Risk Profiles
Due to the broad investment spectrum, not all Flexi Cap Funds have the same risk profile. Some may adopt a more conservative approach, while others could be more aggressive. It’s crucial for investors to align their choice with their own risk tolerance.
In Flexi Cap Funds, fund managers actively balance risk and return by leveraging investment opportunities across various market capitalizations. Anil Rego, founder of Right Horizons PMS, suggests that, in current market conditions, the flexi-cap strategy stands out for equity investors. It enables them to shift funds between large, mid, and small caps based on market dynamics. In times of volatility, investors tend to seek safety, making large-cap stocks a logical choice for investment.
Flexi Cap Funds, with their ability to adapt to market changes, can be exposed to higher levels of market volatility. Investors who are risk-averse should carefully evaluate their investment choices within this category
Factors to Consider Before Investing in Flexi Cap Funds
Before investing in Flexi Cap Mutual Fund, there are certain factors that one should consider, which include:
- Fund Manager: The fund manager plays a crucial role in the performance of the fund. It is important to research the fund manager’s track record and experience in managing Flexi Cap Funds or similar funds.
- Investment Objective: It is important to understand the investment objective of the Flexi Cap Mutual Fund and whether it aligns with your investment goals. Some Flexi Cap Funds may focus on generating long-term capital appreciation, while others may aim to generate regular income.
- Expense Ratio: The expense ratio is the annual fee charged by the mutual fund for managing investments. It is important to compare the expense ratio of different Flexi Cap Funds and choose the one that offers a lower expense ratio without compromising on the quality.
- Market Capitalization Bias: Flexi Cap Funds can have varying degrees of exposure to large, mid, and smallcap stocks. It is important to understand the market capitalization bias of the fund and ensure it aligns with your investment objectives and risk profile.
Flexi Cap Funds vs Multi Cap Funds
The following table demonstrates a comparative analysis of Flexi Cap Funds vs Multi Cap Funds:
|Aspects of Difference||Flexi Cap Funds||Multi Cap Funds|
|Investment Mandate||Highly flexible, no constraints on capitalization allocation.||Mandated to maintain 25% allocation across all capitalization segments.|
|Asset Allocation Freedom||Greater freedom to choose stocks regardless of company size or market segment.||Limited flexibility due to the 25% allocation mandate, making them somewhat constrained.|
|Switching Between Segments||Can freely switch between market segments based on opportunities and trends.||Restricted in switching, as they must adhere to the 25% allocation rule, allowing only marginal adjustments.|
|Differentiation Factor||Launched as a distinct category to provide more flexibility compared to Multi Cap Funds.||Traditional approach with a balanced allocation strategy.|
|Restrictions||Minimal restrictions on stock selection and allocation.||Constrained by the 25% allocation mandate, limiting maneuverability.|
|Overall Flexibility||Offers a high level of investment flexibility, suited for dynamic market conditions.||Constraints on capitalization allocation.|
Flexi Cap Funds stand out for their agility and adaptability in capital allocation, making them a preferred choice for investors seeking greater freedom and versatility in their investment strategy.
Flexi Cap Fund vs Other Funds
Large Cap Funds vs Flexi Cap Fund
Large Cap Funds invest primarily in companies with large market capitalization. They aim to provide stability to the portfolio with lower risk and potentially moderate returns. On the other hand, Flexi Cap Funds can invest in companies across market capitalization categories and aim to generate better returns than Large Cap Funds.
Mid-Cap Funds vs Flexi Cap Fund
Mid-Cap Funds invest in companies with medium market capitalization, providing a balance between stability and flexi cap fund growth potential. In comparison, Flexi Cap Funds may have exposure to mid-cap stocks but can also invest in large-cap and small-cap stocks, depending on the market conditions.
Small Cap Funds vs Flexicap Funds
Small Cap Funds invest in companies with small market capitalization and have a higher risk-return profile. Flexi Cap Funds may also invest in small-cap stocks but can provide more diversification by investing in large-cap and mid-cap stocks as well.
Multi-Cap Funds vs Flexi Cap Funds
Multicap Funds invest in companies across market capitalization categories, similar to Flexi Cap Funds. However, Flexi Cap Funds have more flexibility as they are not required to invest a minimum percentage of their assets in any specific market capitalization category.
Taxation on Flexi Cap Funds
Flexi-cap Funds primarily invest in equity or equity-related instruments, subjecting their gains to Equity Mutual Fund tax treatment.For redemptions within 12 months, profits are considered short-term capital gains, taxed at a 15% flat rate.
Hold for over a year, and they become long-term capital gains. If below Rs. 1 Lakh, it’s tax-exempt; beyond that, a 10% tax applies without indexation. For example, a Rs. 1.5 Lakh long-term gain, Rs. 1 Lakh is exempt, and the remaining Rs. 50,000 is taxed at 10%.
Who Should Invest in Flexi Cap Funds?
Flexi Cap Funds have gained popularity due to their flexibility and potential for higher returns. These funds are suitable for a variety of investors, making them a versatile choice in your investment portfolio. Here’s a breakdown of who should consider investing in Flexi Cap Funds:
- Aggressive Investors: If you have a higher risk tolerance and are looking for capital appreciation over the long term, Flexi Cap Funds provide the opportunity to invest in a diversified mix of companies across market capitalizations.
- Diversification Seekers: Investors who want diversification without being restricted by specific market segments can benefit from Flexi Cap Funds. These funds allow you to tap into growth potential across large-cap, mid-cap, and small-cap stocks.
- Dynamic Market Enthusiasts: For those who want their investments to adapt to changing market conditions, Flexi Cap Funds are an ideal choice. Fund managers have the flexibility to adjust the portfolio as per market trends.
- Long-Term Investors: Flexi Cap Funds are well-suited for individuals with a long investment horizon. They provide the freedom to capitalize on market opportunities and trends over time.
- Experienced Investors: Seasoned investors who can actively monitor and manage their investments may find Flexi Cap Funds appealing. The flexibility requires active decision-making based on market dynamics.
- Risk-Taking Individuals: If you’re comfortable with market volatility and can manage the associated risks, Flexi Cap Funds can potentially offer higher returns compared to more conservative options.
To Wrap It Up…
In conclusion, flexi cap funds are an excellent option for investors looking for a dynamic investment option that can provide higher returns while keeping the risk at a minimum. With the freedom to invest in various sectors and asset classes, these funds offer diversification and flexibility.
However, the choice of the fund manager, investment objective, and expense ratio should be carefully considered before investing in flexi-cap funds.
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Flexi-cap funds invest in companies across all market capitalization segments, including large-cap, mid-cap, and small-cap stocks.
A Flexi Cap Fund focuses on equities, while a Balanced Advantage Fund combines equities and debt. Experts recommend both, with investors choosing based on their goals.
Multi-Cap Funds invest across market capitalizations, while Flexi Cap Funds offer flexibility to invest in companies of any size and sector, providing a balanced exposure to all capitalization segments.
Large-cap funds offer stability, while flexi-cap funds expose investors to various market segments and potentially higher growth opportunities.
Flexi-cap funds suit investors with moderate to high risk tolerance and a minimum five-year investment horizon.
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