Flexi-cap mutual funds are equity-oriented mutual funds that offer investors the flexibility to invest in large, mid, or small-cap funds. These funds provide investors with the flexibility to adapt to changing market conditions by shifting investment across different market caps.
Read on to learn more about how Flexi cap funds have become increasingly popular among investors seeking potential long-term growth.
Understanding Flexi Cap Funds
Flexi Cap mutual funds are a type of equity mutual fund that invests a minimum of 65% of its assets in equity or equity-oriented investments. The equity is allocated freely across different sectors and market caps, ensuring that the funds are well-diversified.
For example, in Multi-cap funds, a fund manager has to invest at least 75% in equities and allocate 25% each to large, mid, and small-cap funds. However, Flexi cap funds require only 65% equity investment with no cap allocation which makes it more flexible for market adjustments. This flexibility also allows fund managers to adjust the portfolio according to market conditions while maintaining the required equity exposure.
Flexi-cap funds also aim to balance risk and return by diversifying across various market sizes, making them a dynamic investment strategy. Investors can also invest regularly in Flexi-cap funds through a Systematic Investment Plan or SIP. These funds do not have a lock-in period.
Benefits of Investing in Flexi Cap Funds
Here are 5 advantages offered by Flexi-cap funds to investors looking for long-term growth:
Flexibility in Investment Strategy
One of the core strengths of Flexi Cap Funds lies in the freedom granted to fund managers to allocate assets based on prevailing market opportunities, valuation levels, and economic conditions.
For example, if mid-cap stocks are undervalued and offer promising growth, the fund can increase exposure to these without any restrictions. Conversely, in times of uncertainty, the fund can focus more on large-cap stocks to provide stability.
This adaptability empowers the fund to dynamically optimize returns while managing risks effectively.
Portfolio Stability and Risk Management
Large-cap investments serve as a risk-mitigation tool within Flexi Cap Funds, as these companies generally have strong balance sheets, consistent earnings, and better market liquidity.
During market downturns, fund managers can increase allocation to large caps to provide downside protection. This dynamic balancing acts like a risk buffer, smoothing portfolio volatility and safeguarding investor wealth while still pursuing growth through other segments.
Offers consistent returns
Flexi-cap funds aim to offer consistent returns by diversifying investments across multiple sectors. This spread of investments reduces volatility and ensures that enough funds are generated for sustainable growth. These funds are particularly beneficial during specific market downturns.
In 2024, the category delivered an average return of 37.88%, outperforming benchmarks.
Professional Fund Management
Flexi Cap Funds are actively managed by seasoned fund managers who conduct extensive research and adjust portfolios as market dynamics change.
This hands-on approach provides investors access to expertise and research-driven decisions, ideal for those who do not have the time or knowledge to track individual stocks.
Outpacing Inflation
Flexi-cap funds outpace inflation by investing in equities that historically offer higher returns than fixed-income assets. By maintaining a minimum 65% equity allocation, investors are offered growth opportunities across various sectors and market caps. This helps investors to increase their purchasing power over time.
Conclusion
Flexi-cap funds offer a flexible and diversified investment strategy. This makes these investment vehicles an attractive option for new and seasoned investors.
With the ability to invest across various market segments, investors can diversify their investment portfolio and manage risks with the best mutual funds for SIP and lump sum. However, they should evaluate their risk tolerance and identify their objectives before making any decision.
