Flexi-cap mutual funds are one of the newest categories of mutual funds introduced by SEBI in 2020. While many confuse Flexi Cap Funds with mid-cap funds, both poles are apart from each other. Investment experts around the globe think having a Flexi-cap in your investment portfolio can be one of the best things. However, whether the Flexi-cap fund is good for your investment portfolio or not depends on a different factor.
What are Flexi-cap funds?
As per AMFI, Flexi-cap funds are one of the categories of mutual fund schemes which must invest 65% of its assets into equity and equity-related instruments of companies irrespective of market capitalization. So, there is no rule like in mid-cap funds where 25% of assets have to be invested in each of the three categories which are large-cap, mid-cap, and small-cap. Here in Flexi-cap, the fund manager can allocate assets as per the market condition. So, for instance, if the market is going up and small-cap stocks are offering huge returns, the fund manager can reallocate the majority of the assets into small-cap stocks. This will help the fund’s return to growth when the markets are surging. Similarly, during volatile market conditions, the fund manager can reallocate the majority of the assets into large-cap to reduce the risk and retain the returns of the fund. So, Flexi-cap funds are as flexible as their name.
Why Flexi-cap funds can be great for your mutual fund portfolio?
Flexi-cap fund’s flexibility in allocating assets to market scenarios makes it suitable for any market condition and investor. A risk-averse investor as well as a risk-taker can invest in Flexi-cap funds. The reason behind this is simple. As a risk-averse investor, you will be looking for stable returns, and, lower risk, and a risk-taker would go for higher risk for higher returns. In Flexi-cap funds, there is a high probability of generating higher returns than large-cap or mid-cap funds but it is also not as risky as the small-cap funds. The facility of shifting funds from large-cap to small-cap or mid-cap and vice versa makes these Flexi-cap funds less difficult. Apart from these, here are some other reasons for including Flexi-cap funds in your mutual fund portfolio –
* Returns generated by Flexi-cap funds are observed to be inflation-beating in most scenarios.
* If you are looking for long-term investment options, then Flexi-cap funds are one of the best avenues to invest. You can invest in Flexi-cap funds for a tenure of five to seven years.
* Offer returns which are higher risk-adjusted as the fund manager have the flexibility to shift assets as per market conditions. Then helps in minimizing the risks.
* This dynamic fund has no restriction on investment style either. The fund manager can invest in growth stocks, value stocks, as well as blue-chip stocks. This helps your mutual fund portfolio to be well diversified.
Why Flexi-cap funds are so much in the news?
As per AMFI’s report for June 2022, there has been the highest inflow in the Flexi-cap funds. In June 2022, around Rs. 2511.74 crores has been invested in Flexi-cap funds across the country which is higher than all the other equity funds categories. The net asset under management on an average basis was around Rs. 211296.44 crores, which is way in excess of ELSS, small-cap, mid-cap, multi-cap, sectoral and thematic funds.
Wrapping up
So, if you are thinking about investing in Flexi-cap funds for your mutual fund's investment portfolio, this is one of the best times to invest in it as the demand for Flexi-cap funds is increasing because of its long list of benefits. However, make sure you choose the right Mutual Fund Distributor for investing in the right Flexi-cap fund.