Flexi-Cap vs Multi-Cap Funds: What You Need to Know
Learn More Learn More
In a hurry? Read this summary:
are cornerstones of a well-rounded investment portfolio. Investors can balance capital appreciation and preservation through diversification with mutual funds and avoid concentrated risks.
For investors with a stronger focus on capital appreciation, equity mutual funds are the answer to their needs. They offer exposure to equities across sectors, geographies, and market capitalisations while still mitigating the risks associated with equity markets, via diversification. Within this category, flexi-cap and multi-cap funds often attract investors’ attention with the breadth of assets they invest in.
Though they have similar objectives, flexi-cap and multi-cap funds differ significantly in portfolio strategies and investor suitability.
Flexi-cap funds are open-ended that invest a minimum of 65% of their capital in equities, as per the rules of the Securities and Exchange Board of India (SEBI), across market capitalisations—small, mid, and large-cap. There is, however, no minimum threshold for asset allocation in each of these segments and is done solely at the fund manager’s discretion.
This ensures concentrated risks, arising from the underperformance of individual segments, are offset by gains from others. It also lets investors capitalise on emerging opportunities in real time.
Multi-cap funds invest a minimum of 75% of their capital in equities, again, across the small, mid, and large-cap segments of the market. According to SEBI rules, however, they allocate a minimum of 25% of their capital to each of the three segments. Asset allocation with the remaining 25% is left to fund managers’ discretion.
Spreading capital across segments allows them to spread and mitigate risk effectively. This also helps balance risk and reward in one’s portfolio. Where large-cap stocks provide stability, mid and small-cap stocks offer opportunities for growth.
Choosing between flexi-cap and multi-cap funds is not necessarily about picking one over the other. It is more about aligning each type’s advantages with one’s financial goals, market outlook, investment horizon, and risk profile.
Flexi-cap funds are suited to those looking to take on an actively managed approach to their investments, reviewing and rebalancing portfolios periodically as per market conditions.
Multi-cap funds on the other hand are more suited to those looking to take a hands-off approach to wealth creation, prioritising stability, and capital preservation.
One can consider flex-cap funds if they have a higher risk tolerance and are comfortable with dynamic asset allocations across market caps.
Multi-cap funds on the other hand, are better suited to risk-averse investors looking for a uniform exposure to all market caps, balancing capital appreciation with capital preservation.
Flexi-cap and multi-cap funds both offer distinct advantages. It is important to remember, however, that both are inherently market-linked. While their diverse strategies may help mitigate risks and capture emerging opportunities, neither always guarantees capital appreciation.
Standard Chartered Bank, India (‘Bank’) is an AMFI-registered distributor of mutual funds and referrer of other third-party investment products and does not provide any investment advisory services as defined under the SEBI (Investment Advisers) Regulations, 2013. Mutual fund investments are subject to market risks, please read scheme related documents carefully before investing. Past performance is not indicative of future returns. Apart from the RM-assisted journey, SC Invest is an EXECUTION-ONLY platform. The Bank does not provide any investment advice or investment recommendations in respect of any transaction effected through the SC Invest platform.
The contents on this webpage are for general information only and does not constitute an offer, recommendation or solicitation of an offer to enter into a transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration. You are fully responsible for your investment decision, including whether the product or service described here is suitable for you. Standard Chartered Bank will not accept any responsibility or liability of any kind, with respect to the accuracy or completeness of the information in this webpage. The contents herein are for general evaluation only and has not been prepared to be suitable for any particular person or class of persons. Standard Chartered Bank makes no representation or warranty of any kind, express, implied or statutory regarding the contents on this webpage or any information contained or referred to herein. This webpage is distributed on the express understanding that, whilst the information in it is believed to be reliable, it has not been independently verified by us.
This communication has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Standard Chartered Bank India (“SCB/ Bank”) does not warrant its completeness and accuracy. This information is not intended as an offer or solicitation for the purchase or sale of any financial instrument / units of Mutual Fund. Recipients of this information should rely on their own investigations and take their own professional advice. Neither SCB/Bank nor any of its employees shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material. SCB Bank and its affiliates, officers, directors, key managerial persons and employees, including persons involved in the preparation or issuance of this material may, from time to time, have investments / positions in Mutual Funds / schemes referred in the document.
Standard Chartered Bank (“SCB/ Bank”) is a AMFI-registered Mutual Fund Distributor & a Corporate Agent for Insurance products.