scorecardresearchWhat are multi cap mutual funds and how do they work? MintGenie explains

What are multi cap mutual funds and how do they work? MintGenie explains

Updated: 10 Nov 2022, 08:30 AM IST
TL;DR.
Multi cap funds are one of the types of mutual fund that provide the facility of diversification in equity from large cap, mid cap, and small cap funds. Such funds are best suited for the investors who are willing to take risk while investing. In this article, we will understand everything about multicap funds and who might invest in multicap funds.
Multicap funds are one of the types of mutual fund that provide the facility of diversification in equity from large cap, mid cap, and small cap funds.

Multicap funds are one of the types of mutual fund that provide the facility of diversification in equity from large cap, mid cap, and small cap funds.

Mutual funds are considered as one of the best ways to start one’s investment journey as it provides the facility of diversification on behalf of you. Mutual funds usually pool money from the investors and invest in the respective mutual funds schemes according to the required level of risk. There are various types of mutual funds such as equity-oriented, debt-oriented, and hybrid. There is a new fund category introduced as multicap funds establishing its publicity among the investors.

What are multi cap mutual funds?

Multicap funds are the part of equity-oriented funds as fund managers invest in the equities of all the sizes of the companies. When fund managers invest in the large, small, and mid-sized companies in a predetermined proportion, the category of funds is known as multi cap funds.

In this category of funds, fund managers invest 75% of the pooled money in these stocks only. However, they need to invest at least 25% of their total assets dedicated to the multi cap funds in large, mid, and small sized companies each.

Are multi cap funds suitable for you?

Before making any investment decisions, you need to evaluate yourself whether the particular investment is suitable for you or not. Here we are providing a few types of investors who can go for multi cap funds.

New investors

If you are new to the investing journey and you do not have much knowledge about the stock market, then you can invest in a multi cap fund. However, it will be an appropriate investment only if you are ready to take risk that an equity investor can take.

Confused investors

If you are one of the investors who are confused between whether they should go for the stability in returns that are provided by large and mid cap funds, or take a little higher risk and go for small sized companies, the multi cap funds might be a good option for you.

It will give you the combination of stability and consistent returns from large and midcap companies. Also, you can get an exposure of smallcap companies that have a high growth potential to give handsome returns.

Long term investors

If you are looking forward to staying invested for a longer period of time, then you will be able to optimise your investment in a better way. As we all know that large cap companies are already grown up companies, they are already providing returns. But, in the case of small and mid-sized companies, they are in the developing phase. They take time to grow their market and make huge profits from their businesses.

Consequently, you need to give time to your investment in multi cap funds, as when the companies will grow, your investment will also grow. All you need to do is stay invested for a longer period of time.

An adequate diversification is the key to make your investment successful enough to fulfil your financial objective from that particular investment. Always keep your financial objectives, risk appetite, and expense ratio in your mind to be a successful investor and grow your money. 

Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com

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First Published: 10 Nov 2022, 08:30 AM IST