What are flexi cap funds? 

Flexi-cap funds offer a unique investment avenue that combines the stability of large-cap funds with the growth potential of mid and small-cap funds. Let's delve into the details of flexi-cap funds and understand if they can be a part of your mutual fund investment strategy.

What are flexi cap funds? 

Flexi-cap funds are a type of equity mutual fund that invests across the market capitalization spectrum, including large-cap, mid-cap, and small-cap stocks. Unlike other equity funds that have specific mandates, flexi-cap funds provide fund managers with the flexibility to allocate investments across different market segments based on their assessment of market conditions and investment opportunities.

How do flexi-cap mutual funds work?

Fund managers of flexi-cap funds have the discretion to allocate investments across different market capitalizations. This flexibility allows them to adapt to changing market conditions and capitalise on opportunities wherever they arise.

• Market Upcycle: During bull markets, fund managers may increase exposure to mid and small-cap stocks to capitalise on their higher growth potential.
• Market Downcycle: In bear markets, they can shift their focus towards large-cap stocks for stability and reduced volatility.

Advantages of flexi cap funds

• Diversification: By investing across different market capitalizations, flexi-cap funds offer better diversification than pure large-cap or mid-cap funds.
• Flexibility: Fund managers have the freedom to allocate investments based on market conditions, potentially leading to better returns.
• Risk Management: Flexi-cap funds can help manage risk by reducing exposure to any particular market segment during volatile times.
• Potential for Higher Returns: The ability to invest in mid and small-cap stocks can lead to higher potential returns compared to large-cap funds.

Disadvantages of flexi cap funds

• Higher Volatility: Due to the exposure to mid and small-cap stocks, flexi-cap funds can be more volatile than large-cap funds.
• Complexity: The investment strategy of flexi-cap funds can be complex for investors who prefer simpler options.

Should you invest in flexi-cap funds?

Flexi-cap funds can be a suitable option for investors with a moderate to high-risk appetite and a long-term investment horizon. They offer the potential for higher returns while providing some diversification benefits. However, it's essential to conduct thorough research and consider consulting a financial advisor before investing.