Flexi Cap Mutual Funds

Flexi Cap Mutual funds offer the flexibility to invest across large-cap, mid-cap, and small-cap stocks. Unlike category-specific funds, these funds are not restricted to a particular market capitalisation. Learn what flexi-cap mutual funds are, how they work, list of best flexi-cap mutual funds, and how you can select one for yourself.

Best Flexi Cap Mutual Funds

List of the top-performing flexi cap mutual funds sorted by returns with their AUM and Expense Ratio.

What are Flexi Cap Mutual Funds?

As the name suggests, Flexi Cap Mutual Funds enjoy the ‘flexibility’ to invest across all market capitalization. These mutual funds are invested across large, small, or mid-cap companies. 

Unlike Large Cap, Mid Cap, or Small Cap mutual funds, Flexi Cap funds are not restricted to a specific market capitalization segment. This allows for a more balanced and adaptive investment approach, catering to varying market conditions.

The only mandate by SEBI for flexi-cap mutual funds is to invest at least 65% of their assets in equity and equity-related instruments. The fund managers of these mutual funds enjoy the freedom to adjust allocation on the basis of market conditions. 

This approach helps them navigate volatility with ease. The benchmark of Flexi cap mutual funds is usually NIFTY 500 TRI or BSE 500 TRI. These indices consist of the top 500 companies and represent the broader market. Considering the flexibility of these funds to invest across market caps, these indexes serve as an appropriate benchmark.

How does a Flexi Cap Mutual Fund work?

Asset management companies pool money from investors to create a mutual fund. This fund is directed towards a single objective. When you invest in a flexi-cap mutual fund, the fund managers invest your money in at least 65% equity & equity-related instruments, this includes large cap, small cap, and mid cap companies.

What are the benefits of investing in Flexi Cap Funds?

Flexi-cap mutual funds are a popular choice among investors. Let's look at the benefits of investing in a flexi-cap fund:

1. Diversified Portfolio

Flexi-cap funds ensure your portfolio is diversified with different market capitalizations. Investors who prefer not to invest in a fund dominated by a single market capitalization can benefit from a well-diversified fund that includes all market capitalization.

2. High Return Potential

These funds stand the chance of earning a high return potential since they invest in large cap companies known for their stable growth, and small cap & mid cap companies are high-growth, high-risk stocks. Further, the fund managers have the flexibility to adjust the fund allocation to get maximum returns.

What are the risks of Flexi Cap Mutual Funds?

While diversification is a strong suit for flexi-cap funds, these funds can also be affected by certain risks, which include: 

Fund Managers Risk

Flexi-cap mutual funds are actively managed funds, meaning they rely on the fund manager's expertise to make calls and investment decisions. Poor decisions, especially during market volatility when picking and allocating stocks, can lead to underperformance. 

Market Risk

Different Flexi Cap funds follow varying allocation strategies, leading to differences in performance. A fund with a higher allocation to mid- and small-cap stocks inherently carries more risk. If these market segments decline, the fund’s performance is also likely to suffer.

What are the factors to consider before investing in a Flexi Cap Mutual Fund?

With so many options available, how do you pick the right flexi cap fund? This entirely depends on your financial situation and goals. You can decide on the right flexi cap fund for yourself with the following points:

1. Know your Investment Goals: 

Are you looking for long-term wealth creation, consistent returns, or a mix of both? Define your risk appetite. Flexi cap funds can carry varying levels of risk depending on their portfolio mix.

2. Portfolio Allocation: 

Check the percentage of investments in large-cap (stable), mid-cap (growth potential), and small-cap (high-risk, high-reward) stocks. Look for diversification across sectors to minimize risk.

3. Analyze Historical Performance: 

Review the fund’s past performance over different time periods. Compare it against its benchmark and peer funds in the same category.

4. Check Fund Manager Expertise: 

A good fund manager can make or break a fund. Research the manager’s track record and style of investment.

5. Evaluate Expense Ratio: 

A lower expense ratio means more of your returns stay with you. However, ensure the fund's performance justifies the cost.

6. Consider Fund Size: 

Larger funds often offer stability but might face challenges in small-cap investments. Small funds, while nimble, might have liquidity issues.

8. Look for Consistency: 

Consistent performance across market cycles is more important than occasional high returns.

9. Assess Exit Load and Lock-In Period: 

Check if there are charges for early withdrawal or a lock-in period that affects liquidity.

10. Tax Efficiency: 

Dividends and capital gains are taxed differently. Choose a fund that aligns with your tax planning.

Investing in a Flexi Cap mutual fund is all about balancing flexibility and performance. Do your research and ensure the fund aligns with your goals. 

What are the returns from Flexi Cap Mutual Funds?

For flexi-cap funds whose benchmark is NIFTY 500, average returns have been 13.05% in 3 years, 16.34% in 5 years, and 11.58% in 10 years.

Taxation on Flexi Cap Mutual Fund

When you sell your mutual fund holdings and make a gain on it, you have to pay tax on them. This is called ‘Capital Gains’. There are 2 types of taxes that can be levied.

If you sell your mutual funds within 12 months, it is called Short-term Capital Gain (STCG). If you hold it for more than 12 months it is called Long-term Capital Gain (LTCG).

Learn about your tax implication for equity mutual funds in detail here.

What is the difference between Flexi-cap and Multi-cap Mutual Funds?

While Flexi-cap and Multi-cap both invest in all three market capitalization. They differ in how their assets are allocated.

With Multi-cap mutual funds, SEBI mandates that the fund manager must allocate 25% each across all market capitalization. So multi-cap mutual funds allocate:

• 25% in large cap
• 25% in small cap
• 25% in mid cap 

Unlike Multi-cap, Flexi-cap funds have no fixed allocation. Managers can re-allocate based on market conditions.