Flexi cap mutual funds are equity funds that can invest across large, mid and small cap companies without restrictions. In this post, we will understand what flexi cap funds are, the types of flexi cap funds, their key features, pros and cons, Best Flexi Cap Mutual Funds to invest in 2024 India
Key Features of Flexi Cap Funds
- Flexibility to invest across large, mid and small cap stocks
- Aim for long-term capital appreciation
- Can shift allocations between market caps
- Tend to hold a diversified portfolio
- No market cap related investment restrictions
Advantages of Flexi Cap Mutual Funds
- Flexibility to tap growth across market caps
- Not constrained by market cap bias
- Diversification across market caps reduces volatility
- Ability to align with market cycles
- Potential to generate higher returns than large cap funds
Limitations of Flexi Cap Funds
- Higher risk than large cap funds given mid and small cap exposure
- Require expertise to evaluate stocks across market caps
- Prone to volatility, need longer investment horizon
- Lack of focus compared to market cap based funds
Flexi cap mutual funds provide flexibility to invest across the market cap spectrum. They allow tapping into the growth potential of mid and small caps. While they carry higher risk, they can provide better returns over the long run compared to large cap focused funds. Evaluate your risk appetite before investing.
Comparison with Other Mutual Fund types: Which is better?
Flexi cap mutual funds are the latest category of equity funds introduced by SEBI that can invest across market caps. How do they compare with other popular mutual fund categories like large cap, mid cap, multi cap, and small cap funds? We will analyze the key differences.
Flexi Cap vs Large Cap Funds
- Flexi cap funds can invest across market caps whereas large cap funds predominantly invest in large cap stocks
- Flexi cap funds have flexibility to move between large, mid, and small caps whereas large cap funds have to remain invested mainly in large caps
- Large cap funds have lower volatility and risks compared to flexi cap funds
- Flexi cap funds have potential to give higher returns over the long term compared to large cap funds
- Flexi cap funds require researching companies across market caps whereas large cap funds focus on mature large companies
Flexi Cap vs Mid Cap Funds
- Flexi cap funds invest across the market cap spectrum including mid caps whereas mid cap funds only invest in mid cap stocks
- Compared to mid cap funds, flexi cap funds have lower risks due to diversification across market caps
- Mid cap funds are focused in their exposure to mid cap stocks compared to flexi cap funds
- Flexi cap funds have the flexibility to maneuver across market caps based on outlook
Flexi Cap vs Multi Cap Funds
- Earlier multi cap funds had to invest minimum 75% in equities with no restrictions on market caps, now flexi cap funds have taken that position
- Multi cap funds now have to invest a minimum of 25% each in large, mid and small caps, restricting flexibility
- Flexi cap funds enjoy higher flexibility now across market cap compared to multi cap funds
- Both aim to generate higher returns through exposure to mid and small caps
Flexi Cap Funds vs Small Cap Funds
- Small cap funds only invest in small cap stocks, flexi cap funds can also invest in mid caps and large caps
- Small caps carry highest risks, flexi cap funds are more diversified across market caps
- Small cap funds allow focused exposure to potential high growth small cap space
- Flexi cap funds cast a wider net and provide stability through multi cap exposure
Flexi cap funds score in terms of the flexibility they provide in maneuvering across market caps. They allow tapping into growth potential across the market cap curve.
How Do Flexi Cap Funds Work?
- Invest minimum 65% across large, mid and small cap stocks
- Remainder in debt, cash, derivatives etc.
- Fund manager decides allocation across market caps
- Aim for long-term capital appreciation
- Diversify across sectors and market caps
- Can maneuver allocations to tap growth opportunities
Factors To Consider Before Investing in Flexi Cap Funds
- Your risk appetite – flexi caps are riskier than large cap funds
- Return expectation – evaluate long term return potential
- Your investment goals and horizon – flexi caps need 5+ year horizon
- Other assets in portfolio – balance out risks if you have other equity funds
Risks Involved in Flexi Cap Funds
- Prone to volatility given mid and small cap exposure
- Market downturns can lead to capital erosion
- Requires expertise to pick stocks across market caps
- Need patience to ride out market cycles
Does it make sense to invest in Flexi Cap Mutual Funds in 2024?
- India poised for economic growth post-pandemic
- Flexi cap funds well-suited to tap growth across caps
- Expansionary budgets aimed at growth – positive indicator
- Depends on your risk appetite and investment horizon
Who should consider investing in Flexi Cap Mutual Funds?
- Investors with high risk tolerance aiming for higher returns
- Investors looking for flexibility in one mutual fund
- Existing mid and small cap investors who want consolidation
- Long-term investors aligned with fund’s horizon
Why Should You Invest in Flexi Cap Funds?
- Exposure across market caps – diversification
- Ability to tap high-growth potential in mid and small caps
- Maneuver market cycles by shifting across caps
- Lower volatility compared to mid and small cap funds
How are Flexi Cap Mutual Funds taxed in India?
- Flexi caps are open-ended equity funds
- Taxed similar to other equity funds
- 10% LTCG tax on gains over Rs 1 lakh if held over 1 year
- 15% STCG tax if redeemed before 1 year
- Taxed as per investor’s tax slab if dividend paid
Flexi cap mutual funds can be good investment options for risk-tolerant investors aiming for long-term capital growth through multi cap exposure. Consider your investment goals, time horizon and risk appetite before investing.
How to Choose the Best Flexi Funds?
Flexi cap mutual funds are gaining prominence as they can invest freely across large, mid and small cap companies. But how do you pick the best flexi cap funds to invest in 2024? Here are some tips.
- Analyze past returns – Look at 3 and 5 year returns to gauge performance across market cycles.
- Evaluate portfolio composition – Check exposure across market caps and sectors. Diversification is key.
- Assess downside protection – See how much the fund fell during market declines. Lower is better.
- Study portfolio turnover – Higher turnover indicates excessive trading. Look for lower turnover.
- Check AUM and fund age – Bigger and older funds usually tend to be more stable.
- Assess fund management – Experience of fund manager managing flexi cap funds is vital.
- Consider expense ratio – Lower expense ratio means more returns come to you.
How to Invest in Flexi Cap Mutual Funds
- Choose a fund house with a good track record in managing flexi cap funds
- Select a fund with a well-balanced portfolio and experienced fund management
- Start a SIP to benefit from rupee cost averaging and compounding over time
- Allocate 20-30% of equity portfolio to flexi cap funds for diversification
- Remain invested for long term time horizon of at least 5 years
Analyze portfolio composition, returns across market cycles, fund management expertise and costs while selecting flexi cap funds. Invest through SIPs with at least a 5 year horizon to get best results.
What are Best Flexi Cap Mutual funds to choose in 2024?
Here is the list of best performing Flexi Cap funds of 2023 based on annual returns:
[table id=Flexicapfunds /]
Looking at just annual returns doesn’t show the full picture of a fund’s performance. To properly analyze a fund, you need to look at rolling returns, how it compares to benchmarks, and downside risks.
Based on those factors, top recommended funds are:
Conclusion:
Flexi cap mutual funds provide investors the flexibility to invest across large, mid and small cap companies without restrictions. This allows tapping into growth potential across market caps. Flexi cap funds aim for long-term capital appreciation through diversification. However, they carry higher risks than large cap funds given exposure to mid and small caps. Evaluate your risk tolerance and investment time horizon before investing in flexi cap funds. Look at portfolio composition, returns across cycles, fund management expertise and costs while selecting the right flexi cap fund to invest in.
Frequently sked Questions (FAQs)
Are Flexi Cap funds considered a good investment choice?
Flexi Cap funds are considered a good investment choice as they provide exposure across large, mid and small cap stocks, thereby providing optimal diversification. The flexibility to invest across market caps allows fund managers to tap growth opportunities.
Are Flexi Cap Funds taxable?
Yes, Flexi Cap Funds are taxable. The tax treatment is similar to that of equity funds, with 10% tax on LTCG above Rs 1 lakh and 15% tax on STCG.
Are Flexi-Cap Mutual Funds high risk?
Flexi Cap Funds have moderately high risk since a portion of their corpus is invested in mid and small cap stocks. However, the risk is lower than mid and small cap funds due to diversification across market caps.
Can I set up a Systematic Investment Plan (SIP) in Flexi Cap Funds?
Yes, you can start a Systematic Investment Plan (SIP) in Flexi Cap mutual funds to invest periodically and benefit from rupee cost averaging.
How do Flexi-cap funds allocate their assets?
Flexi Cap funds have the flexibility to invest a minimum of 65% in large cap stocks and balance 35% between mid and small caps. This provides optimal diversification.
How long should I stay invested in Flexi Cap Mutual Funds?
Flexi Cap funds are ideal for long term investment horizon of at least 5 years or more, to realize their full growth potential.
How much money should I invest in Flexi Cap Funds?
As per risk appetite, investing upto 20% of portfolio in Flexi Cap funds is advisable. Gradually increase allocation as per comfort and goals.
How to Choose the Best Flexi Funds?
Choose Flexi Cap funds with strong performance across market cycles and caps, experienced fund management team and diversified portfolio. Check portfolio concentration risk.
Is Flexi Cap Fund Good For The Long Term?
Yes, Flexi Cap funds are ideal for long term wealth creation of 8-10 years, due to their multi cap approach and flexibility to tap opportunities.
Is it a good time to invest in Flexi Cap Funds?
Now is a good time to start SIP in Flexi Cap funds to benefit from current valuations and diversification across market caps.
Is it possible to transfer from one Flexi Cap Mutual Fund to another?
Yes, you can switch from one Flexi Cap fund to another directly or withdraw and reinvest. However, there might be exit load if withdrawn before 1 year.
Is it possible to withdraw my investment in Flexi Cap mutual funds at any time?
You can withdraw anytime from open-ended Flexi Cap funds. However, exit load may be applicable if redeemed before 1 year.
Should I invest in Flexi Cap Mutual Funds?
Yes, Flexi Cap funds are a good investment option for equity exposure through a single fund. The multi cap approach provides stability and growth opportunities.
What are the benefits of investing in Flexicap funds?
Benefits include diversification across market caps, stability from large caps and growth from mid/small caps. Ability to tap opportunities is a key benefit.
What are the best flexicap funds to invest in 2024?
Some of the top flexi cap funds based on past performance are HDFC Flexi Cap Fund, Parag Parikh Flexi Cap Fund, Kotak Flexicap Fund.
What are the expected returns of Flexi Cap Funds?
Flexi Cap funds have the potential to deliver 15-18% returns over long term of 7 years or more. However, past performance may not sustain.
What are the risks involved in investing in Flexi Cap Funds?
Risks include volatility from mid/small cap exposure, sector/stock concentration risk and vulnerability to market downturns. Research thoroughly before investing.
What is the risk category of flexi cap fund?
Flexi Cap funds fall under Moderately High risk category as per SEBI guidelines.
Where do Flexi Cap Mutual Funds invest?
Flexi Cap funds invest minimum 65% in large caps, and remaining in mid caps (35%) and small caps (25%) to gain optimal diversification.
Why Flexi Cap Funds can be the best choice for your portfolio?
Flexi Cap funds provide stability of large caps and growth potential of mid/small caps in one fund. The multi cap approach makes them a good core portfolio holding.
