Why Investing in Flexi Cap Funds Can Balance Risk and Reward
lexi Cap Funds offer a dynamic investment approach, giving investors the flexibility to tap into opportunities across market capitalisations.
Flexi Cap Funds
Flexi cap funds are gaining popularity for their smart blend of flexibility and risk-adjusted returns. With the ability to invest across the full spectrum of market caps, these funds offer a smart way to balance risk and reward. In bullish times, they chase growth; in downturns, they shift to stability. This flexible approach makes them an appealing option for investors, aiming for long-term capital investment without committing to one market segment. Curious to learn how they work and how to choose the best one? Read the full blog to find out.
What is a Flexi Cap Fund?
This is an open-ended equity mutual fund investing in an amalgamation of large-cap and small-cap stocks without any fixed allocation limit. As per SEBI rules, they must keep at least 65% of their portfolio in equity and equity-linked instruments. The biggest advantage of a flexi cap fund is its flexibility. Fund managers can dynamically shift investments between market caps, depending on the market outlook, helping to balance risk and reward. These funds are ideal for long-term investors who want a balanced exposure to the entire stock market.
Advantages of Flexi Cap Funds
Flexi Cap Funds offer a dynamic investment approach, giving investors the flexibility to tap into opportunities across market capitalisations. Here’s why they stand out:
1. Diversification Across Market Caps
By investing in all three market caps, flexi cap funds ensure portfolio diversification and reduce dependency on any one sector.
2. Dynamic Allocation
The flexible structure of these funds enables timely adjustments and asset allocation based on changing market conditions.
3. Growth Potential
These funds tap into greater growth opportunities by investing in smaller and emerging companies along with large ones.
4. Risk Mitigation
With exposure to various market caps, flexi-cap funds balance the risk-return equation more effectively.
5. Expert Management
Flexi cap funds benefit from expert management, where professionals actively track markets and adjust their portfolios smartly.
6. Flexibility
These funds are flexible in structure and allow quick relocation, helping you capitalise on emerging trends and minimise downside.
Multi-Cap Fund vs Flexi-Cap
Multi-cap fund meaning: Multi-cap funds are mutual funds that invest across large, mid, and small companies. This helps spread risk and gives fund managers more flexibility to shift allocations based on market movements.
Unlike single-cap funds that stick to one segment, multi-cap funds allow managers to grab the best opportunities available across market caps. SEBI rules require at least 25% of the investment in each segment, ensuring true diversification. This helps reduce risk and improve return potential. These funds are perfect for steady, long-term growth with a diversified equity portfolio.
Difference Between Flexi Cap and Multi Cap Funds
The following table depicts the difference between flexi cap and multi cap funds in detail:
|
Multi-Cap Funds |
Flexi Cap Funds |
|
Invests in large, mid, and small caps with fixed allocation. |
Invests across all caps with no fixed allocation. |
|
Must invest 25% each in large, mid, and small-cap stocks. |
No minimum allocation to any specific market cap. |
|
Minimum 75% of assets in equities. |
Minimum 65% of assets in equities. |
|
Moderate fund manager flexibility. |
High fund manager flexibility. |
|
Higher risk due to small- and mid-cap exposure. |
Balanced risk with dynamic allocation. |
|
Suitable for long-term investors with a higher risk appetite. |
Suitable for medium- to long-term investors. |
|
Equity taxation applies (STCG 15%, LTCG 10% above ₹1 lakh). |
Same tax rules as Multi-Cap Funds. |
|
May perform better in bull markets. |
Can adapt better during market ups and downs. |
|
Less flexible in volatile markets. |
More adaptable to changing market conditions. |
Flexi Cap vs Balanced Advantage Fund
To help you understand which fund aligns better with your risk-taking potential and financial goals, here is a comparison between flexi cap and balanced advantage funds:
|
Balanced Advantage Funds (BAFs) |
Flexicap Funds |
|
Equity allocation changes dynamically based on market conditions. |
Maintain at least 65% equity exposure at all times. |
|
Aim to reduce risk in volatile or expensive markets. |
Carry a higher risk due to consistent equity exposure. |
|
Typically, they invest 30–80% in equities and the rest in debt. |
Invest heavily in equities across market caps. |
|
Generally offer moderate to high risk. |
Suitable for investors with a high risk appetite. |
|
Returns can vary based on market timing and allocation shifts. |
Can offer higher long-term returns by staying invested in equity. |
|
Actively managed; usually have higher expense ratios (1.5–2.5%). |
Expense ratios are slightly lower on average (1–2%). |
Key Takeaways
Flexi cap mutual funds work best for investors who want both flexibility and long-term wealth creation. They balance diversification and flexibility, making them suitable for investors who can stay invested through market cycles. With its dynamic nature, these funds can adapt to changing market conditions and capture growth. Now that you know how flexi cap funds compare to multi cap and other fund types, weigh your options carefully. Make sure the fund fits your investment goals and time horizon before investing.