Flexi-cap funds are gaining favour among investors, considering the market uncertainty prevailing at the moment and the heightened valuations across the mid-cap and small-cap universe.
These funds remain unique as they allow fund managers to switch between large-, mid-, and small-cap stocks without limitations.
Fund categories involving multi-cap, mid-cap, and large-cap tend to follow rigid mandates, which result in limiting flexibility when it comes to adapting to differing market scenarios.
On the other hand, flexi-cap funds display the flexibility to invest across the entire market spectrum and help in investment portfolio diversification across companies with different market capitalisation (m-caps).
Adapting to changing market trends while optimising returns for investors without any restriction is suitably aided in the case of flexi-cap funds.
Flexi-cap funds deploy several strategies to act as a hedge against volatility, including active allocation based on market scenarios and market timing by suitably adjusting the mix of large-, mid-, and small-cap stocks with an aim on high-quality and growth-oriented companies that are less influenced by market movements.
Through these strategies, funds are able to adapt to changing market dynamics, reduce risk, and potentially provide more portfolio stability to gain from respectable returns. Flexi-cap funds aim to reduce volatility through diversification across various sectors and m-caps.
It is to be noted that when an investor chooses a flexi-cap fund, they should ideally look at an investment horizon that extends more than large-cap investments but comparatively less than small-cap investments.
Investors are required to take stock of their risk appetite and comfort level with market volatility prior to investing in flexi-cap funds. Generally, flexi-cap funds can invest in any of the m-caps; the largest allocation is given to large-cap stocks.
The blue-chip stocks in a flexi-cap fund aid an investor in gaining stability, while the small-cap stocks help in maximising growth.
Moreover, there is no exit load or tax implications levy despite a fund manager making active management. Flexi-cap fund is more of a proxy for large-cap stocks than mid-cap or small-cap stocks.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.