Are you interested in investing in stocks with a range of market capitalizations? Do you wish to build your portfolio flexibly? Consider investing in Flexi-Cap Funds.
It is a type of mutual fund that invests without limitations, primarily in large, mid, and small-cap companies. Fund managers optimize exposure to a specific market segment depending on the state of the market.
What are Flexi-Cap Funds?
Flexi-Cap Funds make stock investments in various market capitalizations, topics, industries, and sectors. The fund must invest at least 65% of its assets in equities and securities related to equity, per SEBI regulations.
Depending on the state of the market, the fund manager may choose to increase or decrease exposure to a particular market segment.
According to AMFI data, Flexi-Cap funds received the most money from equity funds in June 2022, amounting to Rs 2,511.74 crore.
In addition, the Flexi-Cap Fund sector had a 31% average return for 2021. For example, Flexi-Cap Funds beat Multi-Cap Funds, ELSS, Small-Cap Funds, Mid-Cap Funds, Thematic Funds, and Thematic Sectoral Funds.
Should you invest in Flexi-Cap Funds?
If you have a more significant risk tolerance, consider investing in Flexi-Cap Funds. It is appropriate for individuals familiar with the market and may have a large allocation to mid-cap and small-cap firms.
If this is your first time investing in the stock market, stay away from this one.
The stock market has been highly turbulent after Russia invaded Ukraine. It’s because India imports over 80% of its energy needs, and global crude oil prices have also risen.
Inflation in India is skyrocketing as domestic gasoline, diesel, and LPG costs increase.
In the current market environment, Flexi-Cap Funds have chosen a novel strategy. For instance, the average asset allocation for Flexi-Cap fund schemes was 65% of assets allocated to large-cap stocks.
Large-cap stocks have better stability and increased liquidity in a turbulent stock market; therefore, investing in them is a wise strategy. Large-cap companies are also more risk-adjusted during a market crash since they are more established and offer larger returns.
Flexi-cap funds have less risk to mid-cap and small-cap firms when the markets are unstable. It gives the portfolio more stability than mid-caps and small-cap stocks, which tend to tumble in a declining stock market.
If you’re looking for credible alternative investments in the present market since large-cap funds have recently underperformed, consider investing in Flexi-cap funds.
Why invest in Flexi-Cap Funds?
You can build a diversified portfolio with the aid of Flexi-Cap Funds for every market scenario. You are exposed to equities from various sectors, industries, and themes.
To maximize investment returns, Flexi-cap funds combine various investment strategies. For instance, the value style concentrates on inexpensive companies to maximize long-term profits, whereas the growth style concentrates on growth potential.
The Flexi-Cap funds are an option; they have outperformed peers and the benchmark index over time. Additionally, seek performers that deliver in both bull and bear markets.
Whenever the stock markets are down, choosing Flexi-Cap funds, which have performed well, pays off. Examine the portfolio of the Flexi-Cap fund because some are more conservative and have a bigger risk to large-cap stocks.
If your time horizon is greater than five years, only then are Flexi-Cap funds required. It’s because equities funds can provide long-term gains that outpace inflation.
Nevertheless, pick Flexi-Cap funds with a lower expense ratio, representing the fund management cost. Over time, it contributes to rising overall returns. In summary, Flexi-Cap funds are a wise investment in a turbulent stock market.
What is the difference between Flexi-Caps and Multi-Caps?
Fund managers for multi-cap schemes must ensure that 25% of their assets are invested in each of the three market caps, large-cap, mid-cap, and small-cap. Flexi-cap funds are exempt from this restriction in all three parts.
Who should invest in Flexi-Cap funds?
Long-term investors with some investing experience should consider Flexi-cap funds. It allows owners and fund managers the flexibility to make asset investments based on their perception of the market.
It might be appropriate for investors with a five to seven-year investment horizon because it might offer better returns and possibly outperform inflation. They ought to be ready for potential ups and downs in their investments, though.
Flexi-cap funds taxation
Flexi-cap funds are taxed under the Income-tax Act of 1961 as equity-oriented schemes. Regardless of the slab rate, profits from a Flexi-cap scheme are taxed at a flat rate of 15% within a year.
After the first exemption of Rs. 1 lakh relates to all long-term capital gains, profits over 12 months are subject to a flat 10% tax rate.
Conclusion
Investors should choose a Flexi-cap program very carefully. Before investing, they must be aware of their risk appetite and tolerance.
Flexi-cap plans, for instance, may be conservative. Therefore, it is up to you if you are a risk-averse person or the opposite. Flexi-cap schemes, like other schemes, are subject to various market risks, including volatility, economic decline, and geopolitical conflicts.
Other than that, if there’s any confusion or you need any information, our team of efficient financial advisors is always available for you.
