Fund managers have the liberty to shift between different sectors and companies as and when required. If in case any particular sector or market cap category such as, say, large-cap, is not doing well, while mid-cap is expected to do better going forward, then fund managers can adjust their portfolios accordingly in order to capture the future growth of mid-caps. Fund managers will always be on the look-out for such opportunities, and when they spot one, they shift the funds of investors accordingly.
Flexi-cap funds are quite similar to multi-cap funds in the way these funds invest across market caps, but they differ in the proportion of funds invested in each of the market caps. In the case of multi-cap funds, SEBI has mandated a minimum of 75 per cent of the total assets to be invested in equity and equity-related instruments, with a minimum of 25 per cent each to be allocated towards large-cap, mid-cap and small-cap stocks. On the other hand, flexi-cap funds have to invest 65 per cent of the total assets in equity and equity-related instruments, but there is no pre-defined proportion of allocation for investing in small-cap, mid-cap or large-cap stocks. Due to this benefit of flexi-cap funds, many AMCs re-categorised the multi-cap funds into flexi-cap funds.
What you should know before investing:
- Investors who are ready to invest their money for at least 5 years should consider investing in flexi-cap funds.
- Flexi-cap funds come under the high-risk category, so investors should assess their risk appetite, needs and financial goals and only then decide whether or not to invest.
- Ideally, investors willing to diversify their portfolios across various sectors and market caps to earn optimal returns should invest in these funds.