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In the vast universe of investment options, multi-cap mutual funds stand out as a versatile choice. Even though most investors overlook them, these funds offer a unique blend of opportunities for risk-takers and balanced investors.
Any investor looking to diversify and maximise returns must understand multi-cap mutual funds. In this article, learn about multi-cap mutual funds, what they are, and how to put your money into them.
What are multi-cap mutual funds?
One special kind of mutual fund that gives its holders the freedom to put their money anywhere in the market is the multi-cap mutual fund. While other types of funds focus on investing in companies with a certain market cap, multi-cap funds aim to diversify their holdings by purchasing shares in companies of all sizes.
Regardless of the company’s size, multi-cap funds do not restrict their investment strategy. Rather, they strategically invest according to the opportunities that are currently available across different sectors and market capitalisations. This way, multi-cap funds can take advantage of small businesses’ growth potential and the stability offered by big, established companies.
In multi-cap funds, the manager’s role is vital. They choose which large, medium, and small businesses will receive funding from the fund. When making this decision, the fund manager will usually consider economic indicators, company fundamentals, and market conditions.
By pooling the strengths of large-cap and small-cap companies, multi-cap mutual funds offer investors a more well-rounded portfolio. As an investment vehicle, they provide potential buyers a window into the whole stock market.
Advantages of multi-cap funds
There are many reasons why multi-cap mutual funds are a good choice for investors.
Diversification: Its inherent diversification is one of the key advantages of multi-cap equity mutual funds. These funds invest in companies of various sizes to spread their risk across industries and market caps. Diversification may lead to increased long-term profits.
Flexibility: Multi-cap funds allow managers to rebalance their investments across market caps in response to opportunities and market conditions, unlike restricted-market mutual funds. It may boost returns.
Stable growth and moderate risk: Multi-cap funds may suit moderate-risk investors seeking growth and stability. By eliminating market-cap-specific funds, they simplify investing.
Long-time horizons: Multi-cap funds are good for long-term investors. These work well with long-term goals like retirement or college for the children.
Risks and disadvantages of mid-cap mutual funds
Although multi-cap funds provide diversification and versatility, they have their share of drawbacks and risks.
Dependence manager: The performance of multi-cap funds is highly dependent on the fund manager’s skill in allocating capital among various market caps. Low returns might be the result of an ineffective plan.
Market volatility: These funds may be more vulnerable during market downturns, particularly if they are heavily invested in small-cap stocks, which can be very volatile.
Regulatory Restrictions: Multi-cap funds must invest at least 25% in large-cap, mid-cap, and small-cap stocks, which can hinder the fund manager’s ability to exploit market opportunities.
Top multi-cap mutual funds
Given the abundance of investment opportunities, selecting the appropriate fund can seem impossible. Several multi-cap mutual funds have been very successful, producing above-average returns year after year.
A few of the multi-cap mutual funds showing exceptional performance are:
| Scheme | Year-to-date return |
| Quant Value Fund | 14.06% |
| Quant Flexi Cap Fund | 13.39% |
| Quant Mid Cap Fund | 12.49% |
| Quant Small Cap Fund | 11.38% |
| Quant Large & Mid Cap Fund | 10.19% |
| Quant Large Cap Fund | 9.95% |
| ITI Mid Cap Fund | 9.49% |
| Kotak Multicap Fund | 9.45% |
| Quant Focused Fund | 9.34% |
| SBI Long-Term Equity Fund | 9.31% |
The best multi-cap mutual funds will be those that fit your investing objectives, risk tolerance, and time horizons. Never forget that you should always do research before investing and remember that results from the past are no guarantee of future profits.
How to invest in multi-cap mutual funds
A few simple steps are all it takes to invest in multi-cap mutual funds:
Choose the right platform: Find a trustworthy app or platform that lets you invest in various mutual funds.
Select the fund: Select the Multi Cap Fund that best suits your investment needs by navigating to that section.
Investment mode: Both lump sum investments and Systematic Investment Plans (SIPs) are available; select as per your needs.
Provide KYC details: Your PAN number and banking information is part of the Know Your Customer (KYC) details you must provide.
The significance of disclosing KYC information is paramount. It is stated in the Prevention of Money Laundering Act 2002 that Know Your Customer (KYC) procedures are now obligatory. As a result, mutual fund companies can verify their clients’ identities and prevent the investment of illicit funds.
Bottomline
Investing in multi-cap mutual funds allows you to see the performance of companies in a wide range of industries and sizes. Diversification, flexibility, and higher returns are just a few advantages they offer.
These investments come with their own risks, so it’s crucial to do research before putting your money into them.
FAQs
Mid-cap mutual funds primarily invest in mid-sized companies ranked 101 to 250 in terms of market capitalisation. These funds may offer higher growth potential but can be more volatile. On the other hand, multi-cap mutual funds invest across large, mid, and small-cap companies, offering a diversified portfolio.
Multi-cap funds are ideal for investors who seek diversification across market sectors and sizes. They are suitable for those with a moderate risk appetite and for first-time equity investors due to their balanced portfolio. However, thorough research and understanding of one’s financial goals are essential before investing.
Companies with any market cap size, from large to small, can be invested in by a Flexi-Cap Fund, an open-ended, dynamic equity scheme. Multi-cap funds must invest at least 25% each in large, mid, and small-cap stocks, offering a balanced portfolio. Flexi-cap funds, however, have no such restrictions and can invest across market caps based on the fund manager’s discretion. The choice between the two depends on your investment goals and risk tolerance.
Yes, you can have multiple mutual fund accounts. Mutual funds allow the registration of multiple bank accounts in their records. Additionally, a joint mutual fund account can have up to three account holders, each with equal rights and authority to operate the account. Always ensure your investments align with your financial goals.
Yes, investing in multiple mutual funds can be beneficial for diversification and gaining access to professional asset management. However, it’s important to avoid over-diversification and higher transaction costs. Also, mutual fund overlap, which occurs when multiple funds hold similar securities, should be considered as it can compromise diversification.