Flexi-cap funds are one of the most popular types of mutual funds, offering investors the opportunity to invest in a wide range of stocks and bonds. Flexi-cap funds offer investors access to both large-cap and mid-cap stocks as well as small-cap stocks. This means that you can benefit from exposure to different sectors and industries without having to pick individual stocks yourself.
The fund manager will actively select which companies they believe have the potential for growth over time. If you’re looking for an easy way to start investing, then these types of mutual funds may be just what you need.
This article covers :
- What Is Flexi Cap Fund?
- Features of Flexi-cap Funds
- How does a Flexi-cap fund work
- Best Flexi Cap Mutual Funds
- Flexi Cap Mutual Fund- Quick Summary
- Flexi Cap Mutual Fund- Frequently Asked Questions
What Is Flexi Cap Fund?
Flexi-cap mutual funds is an open-ended equity mutual fund scheme that allows investors to diversify their portfolios across different market capitalizations, including large-cap, mid-cap, and small-cap stocks. It allows you to spread your risk while still maintaining exposure to different sectors and industries. In November 2020, SEBI introduced this fund as a new category under the equity mutual fund scheme.
The allocation of funds in a Flexi-cap fund is not fixed and can change based on market conditions. This means that the fund manager has the flexibility to move funds from one market cap to another depending on the market conditions. This flexibility can help generate higher returns by capitalizing on opportunities in different market segments.
Fees associated with these types of funds can be higher than those charged for passive mutual funds. Since these funds are actively managed rather than passively tracked like most index mutual funds do, performance results could vary greatly from year-to-year depending on decisions made by the fund managers who manage them.
Features of Flexi-Cap Funds
Flexi-cap mutual funds offer diversification by investing in various market capitalizations and sectors. Managed by professional portfolio managers, they primarily invest in equities (at least 65%) and are subject to equity-oriented taxation. With no allocation restrictions, these funds suit investors with a medium to high-risk tolerance and a minimum investment period of 5 years.
- Different market capitalization: Flexi cap mutual funds invest in all types of market capitalization stocks without limiting themselves to investing in a single market capitalization stock or any segment. They have the freedom to switch from one sector to another if one sector is not performing well. For example, 20% of the portfolio of a fund consists of the IT sector. If the It sector is not performing well, the fund manager can switch from the It sector to any other sector with the potential to grow.
- Diversification: One major benefit of investing in a Flexi cap mutual fund is its ability to provide diversification across multiple asset classes such as stocks, bonds, cash, and cash equivalents, etc. It allows investors to spread out risk while still gaining exposure to potentially profitable investments.
- Professional Management: These funds are managed by professional portfolio managers who use sophisticated strategies and research techniques in order to maximize returns for investors. They also monitor markets closely and adjust allocations accordingly depending on changing conditions.
- Equity Exposure: Flexi-cap funds must invest at least 65% of the fund’s corpus in equities. The remaining portion of the fund can be invested in debt and money market instruments. The equity exposure in a Flexi-cap fund allows you to benefit from the growth potential of stocks.
- Taxation on flexi-cap mutual funds: Flexi-cap mutual funds are considered equity-oriented schemes for taxation purposes because they invest majorly in equity, which is 65%. The taxation of Flexi-cap funds is as follows: Short Term Capital Gains and long-term capital gains.
STCG: If you sell your units within 12 months of purchase, the returns realized are known as STCG, and the gains are taxable at a rate of 15%.
LTCG: If you sell the units of your mutual fund after 12 months and the interest earned is more than Rs. 1 lakh, then gains are known as LTCH, which is taxable at 10%.
- No restrictions on allocation: Flexi-cap funds have no restrictions on allocation. The fund manager can invest in any type of stock in any ratio deemed appropriate.
- Minimum investment period: Flexi-cap funds are suitable for investors with a medium to high level of risk tolerance, and it can be a good investment if you want to stay invested for the long term. The goal of this type of fund is to provide long-term capital growth through investments in equities across all sectors and markets.
How Does a Flexi-Cap Fund Work
Flexi-cap funds are open-ended mutual fund schemes. It is also known as a dynamic equity allocation fund that invests across various market capitalizations, including large-cap, mid-cap, and small-cap stocks.
- These funds must invest at least 65% of their assets in equity and equity-related instruments.
- The fund manager can invest across market capitalizations, depending on their investment strategy and market conditions. For example, the fund can invest more in large-cap stocks when the market is volatile and invest in mid and small-cap stocks when the market is bullish.
- The fund manager of a Flexi-cap fund evaluates the market conditions, economic outlook, and performance of various companies before deciding on the allocation of funds. The fund manager may also take a call on sector allocation based on their view of the economy and the market.
- This flexibility allows the fund manager to optimize the returns for the investors. Investors in a Flexi-cap fund benefit from the fund manager’s expertise in stock selection and portfolio allocation.
Best Flexi Cap Mutual Funds
Best Flexi-cap mutual fund plans are given below:
| Flexi cap mutual fund name | 5 Year CAGR | Expense Ratio | SIP Minimum | AUM in Crores |
| Parag Parikh Flexi Cap fund (Growth) | 15.9% | 1.67% | Rs. 1000 | Rs.29344.833 |
| Quant Flexi Cap Fund (Growth) | 16.5% | 2.33 | Rs. 1000 | Rs. 990.092 |
| PGIM India Flexi Cap Fund (Growth) | 13.3% | 1.94 | Rs. 1000 | Rs. 5235.664 |
| HDFC Flexi Cap Fund (Growth) | 12.8% | 1.77 | Rs. 1000 | Rs. 31968.503 |
| Aditya Birla Sun Life Flexi Cap Fund (Growth) | 9.3% | 1.76 | Rs. 1000 | 15737.944 |
| UTI Flexi Cap Fund (Growth) | 11.7% | 1.75 | Rs. 1000 | 24170.178 |
| DSP Flexi Cap Fund (Growth) | 11.1% | 1.84 | Rs. 1000 | 7679.271 |
| IDBI Flexi Cap Fund (Growth) | 9.8% | 2.49 | Rs. 1000 | 357.659 |
| Union Flexi Cap Fund (Growth) | 11.9% | 2.25 | Rs. 1000 | 1333.628 |
| Canara Robeco Flexi Cap Fund (Growth) | 12.5% | 1.77 | Rs. 1000 | 8608.798 |
| SBI Flexi Cap Fund (Growth) | 9.7% | 1.71% | Rs. 1000 | 15840.220 |
| Edelweiss Flexi Cap Fund (Growth) | 10.2% | 2.21% | Rs. 1000 | 1056.340 |
| HSBC Flexi Cap Fund (Growth) | 8% | 2.03% | Rs. 1000 | 3158.857 |
| Tata Flexi Cap Fund (Growth) | NA | 1.84% | Rs. 1000 | 2115.595 |
| Axis Flexi Cap Fund (Growth) | 11.3% | 1.83% | Rs. 1000 | 10269.179 |
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Flexi Cap Mutual Fund- Quick Summary
- Flexi-cap mutual funds are open-ended equity mutual fund scheme that allows investors to diversify their portfolios across different market capitalizations, including large-cap, mid-cap, and small-cap stocks.
- Flexi-cap funds provide flexibility to fund managers to move funds from one market cap to another depending on market conditions, which can help in generating higher returns by capitalizing on opportunities in different market segments.
- The major features of investing in a Flexi-cap mutual fund are diversification, professional management, equity exposure, and the ability to invest in multiple asset classes.
- Flexi-cap funds must invest at least 65% of the fund’s corpus in equities, providing equity exposure to benefit from the growth potential of equity, and have no restrictions on allocation.
- Some of the best Flexi Cap mutual fund plans in India are Parag Parikh Flexi Cap Fund, Quant Flexi Cap Fund, and PGIM India Flexi Cap Fund.
Flexi Cap Mutual Fund- Frequently Asked Questions
1. Flexi Cap Mutual Fund Meaning
A Flexi-cap mutual fund is an open-ended scheme where the portfolio manager has the flexibility to invest across market capitalizations (large caps, midcaps, and small caps).
2. Which Flexicap Fund is Best?
The best Flexi Cap mutual fund plans in India are the Parag Parikh Flexi Cap Fund, Quant Flexi Cap Fund, and PGIM India Flexi Cap Fund.
3. What is the Risk in Flexi Cap Mutual Fund?
This type of fund invests across multiple asset classes, so it can be exposed to different levels of volatility depending on how markets move over time. Another key risk related to investing in Flexi Cap mutual funds is a managerial risk.
4. What is the Difference Between Multicap and Flexi Cap Mutual Funds?
A Multicap fund must invest across market capitalizations, i.e., large-cap, mid-cap, and small-cap stocks. On the other hand, Flexi Cap funds can invest across market capitalizations, but it is not mandated to invest in any specific category.
5. Which is Better, Flexi Cap or Large Cap?
If you have a higher risk appetite and are willing to accept potentially higher volatility in your portfolio, then a Flexi Cap fund may be a better choice for you. However, a Large Cap fund may be a better fit if you prefer stability and lower risk.
6. Is Flexi Cap Fund Good for the Long Term?
Flexi-cap mutual funds are a great option for long-term investments. They offer the potential to generate higher returns than other types of investment vehicles, as they allow investors to invest in stocks across different market capitalizations and sectors.
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