4 Décembre 2019
For an investor, there are many opportunities available to get high returns based on his / her choice of investment. Today, there are several mutual funds that can invest in - small-cap, mid-cap and large-cap that are based on market capitalization. According to SEBI, large-cap companies are the top 100 stocks, mid-cap companies in the range of 101 to 250, while small-cap companies feature 251 on wards.
Of course, each of these mutual funds has its own share of the market and is generally known for its stability, they may also be under performed when the market is bearish. Mid-cap funds are known to deliver high returns during a bullish phase, while small-cap funds are more likely to be vulnerable to losses. How about benefiting from all funds in one go? Yes, you heard it right. If you invest in multi-cap funds, you can invest in these mutual funds. They are relatively more stable and make for a great choice for risk-averse investors!
In addition, these mutual funds are also flexible and free from the restrictions that are otherwise seen in other funds. For instance, if you have gone for a large-cap fund, you can invest in small-cap or mid-cap stocks, even if they are performing extremely well. In such times, a multi-cap fund can really provide great opportunities - your fund manager can increase the allocation of investments in small-cap or mid-cap stocks. In the long-term, a multi-cap fund is better for the creation of wealth than other categories.
Investment style: These funds, like small, mid and large-cap funds are equity-oriented, and need to have a minimum corpus of 65% invested in equity, according to SEBI.
Flexibility in investments: Unlike other mutual funds, multi-cap funds can have stocks across different market capitalisations. This means that you can afford the benefits of all kinds of stocks - there are more flexibility and less restrictions. A fund manager can focus on reallocation of assets from time to time to make the most of different types of stocks that come under the ambition of multicap funds.
Risk situation : Market experts say that these funds are riskier than pure large-cap funds, but less risky than pure mid-cap and small-cap funds. When the market is bearish, the fund manager can make a smart decision to minimize losses.
Magnitude of returns: These stocks offer higher returns, but it also depends on the fund manager and how to pick stocks based on market conditions. According to market experts, these funds have delivered average returns of 6% -9% in the last three years, while in the last five years, the average earnings in the range of 9% -12%, keeping in mind different market cycles.
The bottom line
Multi-cap funds are beneficial for those investors who do not have a large risk appetite, and at the same time, crave flexibility. With these funds, an investor can get a great deal of stability and makes a great choice for a long-term wealth creation. There is one point to remember - since these funds invest in stocks (with their own set of pros and cons), the risk is sometimes difficult to gauge. This is where a fund manager plays a pivotal role - this is why it is important to check the track record of both the fund and the fund manager.
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