Frequently Asked Questions
How does a Flexi cap fund work?
A fund manager manages a Flexi cap fund. Based on their expertise and understanding of the market, they choose companies of different sizes and then invest in them. These fund managers look at the companies’ financial statements to look out for high-growth companies and then invest accordingly.
However, they stick to their conviction to make these investments. They gauge the segments and the industries and estimate the company’s future profits before investing.
How is a Flexi cap fund different from a Multicap fund?
While a Flexi cap fund has a lot in common with a multi-cap fund, they have some stark differences too. Multi-cap funds must follow a 25-25-25 rule, individually investing 25% in large-cap, mid-cap, and small-cap funds.
Therefore, there is not a massive window for diversification. Flexi-cap funds were introduced to make multi-cap funds a bit flexible. These equity funds have no investment limits or a knack for a particular market cap segment. Hence, diversification of investments is quite possible via Flexi cap funds. Also, it helps the fund manager be creative with their investment approach.
Who are the ideal investors of a Flexi-cap fund?
Investors looking at a long-term investment for more than five years should consider Flexi cap funds as a potential investment option. These investment options are ideal for investors who are willing to take minimum risks and want to earn a steady return on their investments.
Also, investors interested in equity-based funds should invest in a Flexi cap fund. This will give them exposure to the equity market, while the debt component of the fund will mitigate the risks to a great extent.
What are some key benefits of investing in a Flexi Cap fund?
There are several benefits of investing in a Flexi Cap fund. The fund managers exercise their free will to choose different companies across market capitalization to make the investments.
They take the ‘go anywhere approach to ensure that the fund is diversified enough. Hence the investors get exposure to the benefits across the entire market spectrum. Also, as the fund holdings are a mix of all kinds of securities, the fund’s risk gets mitigated to a certain extent, protecting the investors from potential losses.
Is investing in a Flexi-cap fund a good idea?
Flexi-cap funds offer diversification to your portfolio. Hence, they play an important part in mitigating the risk and improving the prospect of returns in the long run. These investments are ideal for the long term and provide steady returns if the market is not in favour.
The best part about a Flexi-cap fund is that if the fund manager discovers that the market segment they invested in is not performing well, they might decide to change its allocations. These funds give the best results when you invest in them in the long run. Hence, investing in Flexi-cap funds can be a good idea.