Flexi Cap Vs Multi Cap Funds: An Informative Guide

Mutual funds are a great way to build long-term wealth and protect against inflation, which is why they’re a common choice in investment portfolios. When it comes to equity mutual funds, there are several types to consider, with multi-cap and flexi-cap funds being two popular options. 

Read on to understand how they differ and how you can choose the one that best fits your financial goals.

What is a Multi-Cap Fund?

These are equity schemes that spread their investments across large-cap, mid-cap and small-cap companies, offering diversification. Note these features to better understand it:

• According to a circular from the Securities and Exchange Board of India (SEBI), from September 2020, these funds must invest at least 25% in each market segment
• A minimum of 75% of the fund’s total assets must be in equity or equity-related instruments
• The remaining are allocated to safer investments like debt, cash or other securities

What is a Flexi-Cap Fund?

These are funds that invest in companies across different market sizes and sectors, offering higher flexibility to your portfolio. Here are its features: 

• These are open-ended equity funds
• The fund manager makes the call on investment in different asset classes based on market conditions
• At least 65% of the fund’s total assets are invested in equities
• The remaining 35% can be allocated to other options like cash and debt, among others

Difference Between Multi-Cap and Flexi-Cap

Check out the following table to learn all about the features of flexi-cap vs multi-cap schemes:

Basis of Difference	Multi-Cap Funds	Flexi-Cap Funds
Meaning	These funds invest in large, mid and small-cap companies	These funds invest in companies of any market cap
Exposure to Equity	Minimum 75% of assets in equities	Minimum 65% of assets in equities
Market Cap Allocation	At least 25% allocation is done in large, mid and small-cap companies, according to the Securities and Exchange Board of India (SEBI)	No fixed allocation to market cap categories as they do not have any mandate
Risks	Higher risk due to exposure to a relatively diverse market cap	Moderate risk since these funds have a balanced exposure to various stocks
Management	Fund manager is free to select from any market cap	Fund manager selects stocks from specific market caps

Flexi-Cap Vs Multi-Cap: Which Is Better

The right option for you largely depends on why you’re planning to invest, meaning your investment goals. Your risk appetite is yet another crucial factor. Gaining insight into their main distinctions can assist you in fully understanding both choices. This way, you can make a more knowledgeable decision.

For higher risks in exchange for the possibility of greater rewards, multi-cap funds are a perfect choice. On average, approximately 5 to 7 years of commitment is required. This is due to the fact that they consist of a large percentage of mid-cap and small-cap stocks.

Alternatively, if you are concentrating on large-cap stocks, flexi-cap funds might be a more attractive choice. They also provide the option to invest in stocks of medium-sized and small-sized companies. If you want to invest for 5 years, this could be a suitable choice for you.

However, whether it is flexi-cap, multi-cap or any other type of mutual fund, you can use any of them to get a loan in just 10 minutes. With the Fibe Loan Against Mutual Funds, you can easily pledge these as collateral to get up to ₹10 lakhs without dissolving your investment. Apply now to get funds for any emergency with flexible repayment options by registering on our website or downloading our Fibe app. 

FAQs on Flexi-Cap Vs Multi-Cap Funds

How do flexi-cap and multi-cap funds perform during market volatility?

Market volatility can significantly impact the performance of a fund. During uncertain times, flexi-cap funds’ flexible approach may offer an advantage. They tend to perform better in volatile markets by spreading investments across various market segments. On the other hand, multi-cap funds may not perform well.

Can I switch between flexi-cap and multi-cap funds easily?

Yes, you can switch between various types of mutual funds easily. You have the option to transfer units either partially or entirely from one mutual fund scheme to another, based on your investment needs.

Is a flexi-cap fund good for the long term?

Yes, flexi-cap funds are ideal for long-term investment goals. This is because they offer the flexibility to allocate assets across different market capitalisations, depending on market conditions and the fund manager’s strategy.

Are multi-cap and flexi-cap the same?

No, multi and flexi-cap funds are not the same. However, both are open-ended equity mutual funds that invest in stocks across various market capitalisations.