Flexi-cap is the new entrant in the Indian equity mutual funds scheme scenario. This category came into existence with the SEBI circular released on 6 November 2020. As the name suggests, the flexi-cap fund manager has greater freedom when it comes to choosing the investments to be made under the scheme. Like all existing schemes, you can invest in flexi-cap mutual funds online too. Here are a few things you need to know about the flexi-cap fund and its benefits.
Restriction – 65% of flexi-cap investments must be made in equity and equity-related investments. Other than that, there are no restrictions regarding the investment structure of flexi-cap schemes.
Exposure to individual caps – While multi-cap also invests in multiple segments and market caps, it has to keep a minimum of 25% invested in all three market caps. In flexi-cap, the high-risk exposure of small-cap doesn’t exist, which used to be a cause of concern for many multi-cap investors.
Existing multi-caps – Multi-cap funds got the option of renaming their schemes as flexi-caps. Most fund houses opted for this. They also had the option of merging their multi-cap scheme with their large-cap schemes or other categories like thematic, value fund, etc.
Suitability – Flexi-caps have the avenue of including more large-caps in their portfolio that increases the stability of the fund. It can nullify the volatility that small caps are prone to. As a result, flexi-caps are suitable for investors with a moderate to high-risk appetite and are willing to invest for the long-term, ideally upward of five years. A flexi-cap mutual fund SIP can be the ideal investment vehicle for small and medium investors.
The important benefits of flexi-cap mutual funds
Diversification – Compared to the structural rigidity of large-, mid-, and small-caps, flexi-cap mutual funds offer better diversification of your funds. There are no restrictions on the proportion that can be invested in large-, mid- or small-caps. With exposure to different themes, sectors, and styles, flexi-cap can be a diversified type of mutual fund investment.
Tap opportunities – Because of the flexibility, fund managers of flexi-cap mutual funds can tap opportunities across market caps, sectors, or styles. If any particular segment is performing well, flexi-cap investment in that segment can be increased.
Risk mitigation – Because of the diversification, flexi-caps not only harness opportunities but can also avoid risky segments. The risk and return are well balanced due to the diversified portfolio. Unlike multi-cap, for instance, the 25% limit is not applicable. So, if mid-cap or small cap is not performing well, funds can be withdrawn from that market altogether.
Conclusion
Investing in mutual funds online today is simpler and quicker than ever. A wide variety of investment apps are available, which help invest in mutual funds, whether SIP or lump sum, while also helping you to keep real-time track of all your investments. So, if you want to invest in top Flexi Cap funds, you can browse through Tata Capital Moneyfy app online to see what best suits your needs!