Before zeroing in on an equity mutual fund scheme, conservative investors generally opt for a category that is likely to offer stable returns in the long run.
For investors, there are options galore such as value funds, ELSS (equity linked savings schemes), focussed funds, sectoral, mid cap and large cap funds.
Choosing a mutual fund scheme on the basis of market capitalisation (large cap or mid cap) or opting for a sectoral fund (such as tech fund) can be seen as limiting your investing universe.
Those who prefer diversified investments are advised to opt for schemes that invest small doses in multiple categories. For instance, one can explore investing in multi cap mutual funds.
Let us understand what exactly these funds are!
Multi cap funds
Multi cap funds are mutual funds that invest a minimum of 25 percent in each of the categories of funds across market capitalisation i.e., small cap, large cap and mid cap.
In other words, these schemes are mandated to invest a minimum of 75 percent of funds in a pre-defined ratio, leaving the leeway of remaining 25 percent only.
There are a total of 19 multi cap mutual funds with total assets under management (AUMs) of ₹78,415 crore, as on June 30, 2023, shows the AMFI (association of mutual funds in India) data.
A year ago, there were 14 multi cap schemes with total assets under management (AUM) of ₹53,297 crore, as on June 30, 2022.
Lately, flexi cap schemes have turned more popular because of the flexibility they offer. There are 36 schemes in this category with total AUMs of ₹2,72,743 crore.
Experts believe that investors can opt for these schemes only when they want to stay invested for a long term.
“Investors who want to hold their investment for a long period of time should invest in them. After all, mid and small caps generally outperform large caps in the long run, and multi caps invest a minimum of 50 percent of their assets in these categories. In the past two months, these categories have performed well, so investors can consider investing in the multi caps,” says Sridharan Sundaram, a Sebi-registered investment advisor, and founder of Wallet Wealth.
| Tenure | Return (%) |
| 1 year | 26.18 |
| 3 years | 28.34 |
| 5 years | 16 |
(Source: MorningStar)
Multi cap funds, as a category, delivered an average of 26.18 percent return in the past one year, as the table above shows.
In the past 3 and 5 years, these funds have given a return of 28.34 percent and 16 percent, shows the MorningStar data.
