Frequently asked questions about Flexi-Cap Funds

Today, investors can take advantage of different categories of Mutual Fund Investments depending on their risk appetite, investment horizon, and financial goals. These funds are regulated by the Securities and Exchange Board of India and enable you to earn probable returns in the long run. One such Mutual Fund is a Flexi-Cap Mutual Fund.

What is it?

A Flexi Cap Fund is an Equity Fund that invests in the stocks of companies spread across various market capitalisations, i.e., large-, mid-, and small-cap companies. They are open-ended and invest a minimum of 65% of their total fund corpus in Equity. To understand what a Flexi-Cap Fund is, you should have a fair understanding of market capitalisation. The market capitalisation of companies refers to their total number of shares outstanding multiplied by the price of each share.

As the price of each share keeps changing, so does the market capitalisation of the company. According to the regulatory body, companies are divided into small-, mid-, and large-cap based on their market capitalisations and Flexi-Cap Funds invest across all three.

How does it work?

These funds are not restricted to investing in the stocks of companies in any fixed capitalisation. Hence, the fund manager of the best Flexi-Cap Fund can freely allocate the fund’s assets to companies with varying capitalisations. This reduces risks by lowering the effects of volatility of one capital market. It also diversifies your investment portfolio and enables you to strike a balance between your returns and risks.

This characteristic also offers the fund the possibility of providing steady earnings even when the markets are low. This is because market capitalisation is not a constraint for fund managers with such funds. So, they switch to varying segments based on market movements. This ensures twin benefits: the possibility of investing in stocks which look promising and timely withdrawal if they fail to perform.

Who can invest in these funds?

You can invest in a Flexi-Cap Mutual Fund if:

You have an investment horizon of at least five to seven years.You have a higher risk appetite and are not willing to exit the investment when you see the first signs of volatility.You are comfortable with the short-term underperformance of the fund concerning the benchmark.You want to capitalise on the opportunities provided by mid-cap and small-cap stocks but also want to reduce the risks associated with them.

Investors can invest in Flexi-Caps Funds in small amounts at fixed intervals through a Systematic Investment Plan or make a Lumpsum Investment in one go.

Is it a good option during economically uncertain times?

Yes, it can be a good option. The diverse portfolio of this fund allows it to effectively balance the reward and risk aspects and provides investors with the possibility of significant returns even during uncertain times.