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Flexi-cap vs large-cap: Which mutual fund is better and why?
Flexi-cap mutual fund schemes offer investors flexibility to invest in large, mid, and small-cap stocks based on market conditions, making them popular for diversification
Flexi-cap mutual fund schemes provide investors with the flexibility to invest across large, mid, and small-cap stocks, adjusting allocations based on market conditions to manage risk and diversify portfolios. This adaptability makes flexi-cap schemes a popular choice for investors seeking diversification and willing to navigate market fluctuations.
Flexi-cap schemes are popular among investors seeking portfolio diversification
Flexi-cap schemes offer the flexibility to adjust allocations based on current market conditions and emerging opportunities.
“Unlike the constraints of single large, mid or small-cap schemes, which focus solely on respective companies, flexi-cap schemes provide the opportunity to adjust the allocation according to prevailing market conditions and opportunities. This adaptability has provided flexi-cap schemes increasingly favoured among investors seeking portfolio diversification,” said Gurmeet Singh Chawla, Director at Master Capital Services Ltd.
What are large-cap companies?
Large-cap companies are robustly capitalized entities with stable operations and solid balance sheets, often leading their respective markets and exhibiting consistent growth over time. They typically deliver moderate capital appreciation during bullish market phases while demonstrating resilience against downturns. Moreover, their high trading volumes ensure ample liquidity within the fund.
What are mid and small-cap companies?
Mid-cap and small-cap companies, on the other hand, represent smaller yet growing enterprises. They offer the potential for compounded returns due to their extended growth trajectory, often outperforming benchmarks during economic expansions. However, they are more vulnerable to market downturns and may face liquidity challenges.
Why investors should opt for Flexi-Cap Schemes Over Large-Cap schemes?
Flexi-cap schemes provide an alternative to large-cap schemes by offering exposure to a mix of large, mid, and small-cap stocks. This allows for stability through the liquidity provided by large-caps, while also presenting opportunities for alpha generation with mid and small-caps. Investors can gradually shift towards large-caps while maintaining exposure to mid and small-caps to capture the recovery phase of the investment cycle effectively.
“For example, currently we prefer the relative safety of large caps along with the comfort of holding some liquidity based on the risk-reward offered by the current valuation of Large caps. Thus, one could incrementally move towards large-caps while not reducing mid and Smallcaps significantly to capture the theme of investment cycle recovery well,” said Shaily Gang, Head-Products, Tata Asset Management.
For investors who find it challenging to adjust allocations within their portfolio, investing in flexi-cap or multi-cap funds can provide access to professional fund management services.
“If the investor is unable to shift allocations across fund holdings within his portfolio to reflect the above navigation, best would be to invest into Flexicap or Multicap funds to avail of the professional services by the fund manager in terms of shifting allocations as per the market outlook advised Head-Products, Tata Asset Management,” said Shaily Gang.
Gurmeet Singh Chawla, Director at Master Capital Services Ltd., highlighted that unlike large-cap schemes, which focus solely on large-cap stocks, flexi-cap schemes offer the flexibility to diversify across large-cap, mid-cap, and small-cap stocks. This adaptability makes flexi-cap schemes a more suitable option for investors with higher risk tolerance and a willingness to navigate market fluctuations.
Equity MF inflow hits almost 2-yr high of ₹21,780-cr in January 2024: AMFI data
In January, equity mutual funds witnessed a notable surge in net inflows, totaling ₹21,780 crore, marking the highest monthly influx in nearly two years. This robust momentum was driven by investors' sustained interest in small-cap funds and significant contributions from thematic funds.
Additionally, the monthly Systematic Investment Plan (SIP) contributions reached an unprecedented milestone, amounting to ₹18,838 crore, surpassing the previous month's figure of ₹17,610 crore.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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First Published:20 Feb 2024, 01:37 PM IST
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