Best Multicap Funds

Most new investors are in a fix while selecting the right mutual fund to invest in. Whether they should opt for large-cap or mid-cap or small-cap? Are multi-cap or sectoral funds ideal for investment? These are the questions that new investors may face when they begin to explore the world of mutual fund investments. 

As a first step, investors must know about each of these categories along with some of their basic advantages and disadvantages. Important aspects like large-cap funds offer better stability to an investment portfolio, small-cap funds can provide exceptionally high returns while being risky, etc can be learnt before investing. 

One fund category that needs to be explored by investors is multi cap funds. These offer considerable flexibility since they are diversified equity funds investing primarily in stocks of companies with varying market capitalizations. Here are some of the important details around multi cap funds to aid investors in their investment related decision-making process.

What is a Multi Cap Mutual Fund?

Multi cap funds are equity funds that primarily invest across different market capitalisations, various themes, and segments. These do not follow caps as far as portfolio exposure is concerned and are therefore categorised under high-risk funds. However, multi-cap funds are required to invest a minimum of 65% of total assets in equity and equity-related instruments.

How can multi cap fund investments benefit a portfolio?

Most mutual fund categories have restrictions regarding the investment types as defined in the fund objective. For instance, a large-cap fund cannot invest in mid and small-cap stocks to benefit from higher chances of profitability. Similarly, a mid-cap fund must invest only in mid and small-cap stocks even if there is a downturn in the market. 

This is when multi-cap funds can act as a better choice for investors. Multi-cap funds can take advantage of various investment opportunities available in the market, thereby having better chances of enhanced returns. Investors can balance their portfolio’s risk-return element through low-risk investments in combination with multi-cap fund investments.

Who should invest in Multi Cap Funds?

Investors who are willing to take on higher risks and do not have sufficient time to independently research specific investments in the market can invest in multi-cap schemes. These are mainly helpful for long-term wealth creation. Multi-cap funds have higher chances of generating superior returns as compared to large-cap funds. However, these may offer lower returns as compared to mid and small-cap funds in the long run.

With multi-cap fund investments, investors can gain exposure to companies of varying sizes and reasonably diversify their portfolio.

What are the risks of investing in Multi Cap Funds?

Multi-cap funds may also invest in mid-cap and small-cap stocks and are therefore considered riskier when compared to large-cap schemes. During a market upswing, fund managers of multi-cap funds may increase exposure to mid and small-sized companies to maximise benefit from earnings. Similarly, fund managers may also switch from mid-cap companies to large-cap companies during prolonged market downturns. Thus, multi-cap fund investments pose higher volatility and higher risk for an investor.

Top Performing Multi Cap Funds to Invest in 2021

Some of the top performing high risk mutual fund recommendations for 2021 are:

Parag Parikh Long Term Equity

About the Fund

The scheme aims to achieve long-term capital appreciation through investments primarily in equity and equity related instruments. The fund consists of 65.39% investment in Indian stocks of which 33.97% is in large-cap stocks, 19.51% in small-cap stocks and 9.24% is in mid-cap stocks. 

Inception DateMay 28, 2013
Benchmark NameNIFTY 500 Total Return Index
Fund ManagerRaj Mehta, Rajeev Thakkar
Expense Ratio0.91%

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception
74.32%29.40%20.88%20.03%20.01%

Aditya Birla Sun Life Equity Fund

About the Fund

The fund aims to achieve long-term capital growth and regular income through 90% investment in equities and remaining 10% in debt and money market instruments. It adopts a top-down & bottom-up approach to investing. It also invests a portion of the pooled money in IPOs, emerging sectors & other similar primary market offerings.

Inception DateJanuary 01, 2013
Benchmark NameS&P BSE AllCap Total Return Index
Fund ManagerAnil Shah
Expense Ratio1.17%

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception
76.26%19.14%12.70%16.66%17.28%

UTI Equity Fund

About the Fund

The scheme aims to achieve long-term capital appreciation through investments predominantly in equity and equity related securities of companies across different market capitalizations. 98.02% of the pooled funds are invested in Indian stocks. Of this, 42.25% is invested in large-cap stocks, 33.93% in mid-cap stocks and 8.98% in small-cap stocks.

Inception DateJanuary 2, 2013
Benchmark NameNIFTY 500 Total Return Index
Fund ManagerAjay Tyagi
Expense Ratio1.22%

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception
82.27%26.25%17.25%17.52%16.35%

Invesco India Multicap Fund

About the Fund

The fund aims to achieve long-term capital appreciation through investments in equity and equity-related securities of large, mid and small companies. The fund adopts a bottom up investment approach for stock selection across the market capitalization range.

Inception DateJanuary 01, 2013
Benchmark NameNifty 500 Multicap 50:25:25 Total Return Index
Fund ManagerAmit Nigam, Pranav Gokhale
Expense Ratio0.93%

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception
77.13%23.69%11.81%15.87%18.73%

Shriram Multicap

About the Fund

The fund aims to generate long-term capital appreciation through investments predominantly in Equity & equity related securities diversified over various sectors. Its portfolio comprises 96.31% of Indian stocks. Of this, 58.54% is invested in large-cap stocks, 15.18% is in mid-cap stocks and 12.03% in small-cap stocks.

Inception DateSeptember 28. 2018
Benchmark NameNIFTY 500 Total Return Index
Fund ManagerGargi Bhattacharyya Banerjee , Kartik Soral
Expense Ratio0.65%

Historical Returns of the Fund (annualised)

1-Year2-YearSince Inception
50.06%10.72%11.13%

Conclusion

Investing in multi-cap funds can save investor’s time and efforts of switching exposure across different equity fund categories during changing market scenarios. An investor can enjoy the expertise of a fund manager of a multi-cap fund who can make investment decisions based on market conditions while ensuring maximum returns for investors.

FAQs

  1. What is a multi cap fund?
    Multi cap mutual funds invest in stocks of companies with different market capitalisations. These invest in small-cap, mid-cap and also large-cap companies. The fund switches between investments depending on market movements.
  1. Are multi cap funds good investments?
    Multi-cap fund investments can help in diversifying a portfolio through exposure to stocks of different market capitalisations or company sizes. These make the most of market movements and expected fluctuations and are therefore beneficial for opportunistic investors.
  1. How to invest in multi-cap mutual funds?
    To invest in multi-cap mutual funds, an investor can download the Finity app on his/her smartphone. The app suggests top-rated mutual funds as per investment preference and other criteria. It allows a seamless investment process, especially for new investors.
  1. How risky are multi-cap mutual fund investments?
    Multi-cap mutual funds fall under the high-risk category since these have exposure to companies of all market capitalisations or sizes. 
  1. How to choose a multi-cap mutual fund?
    Investors must consider the below-mentioned points while selecting the right multi-cap mutual fund for investment:
  1. Historical performance of the mutual fund
  2. Expense ratio (lower the better)
  3. AMC / Mutual fund house’s market standing and performance
  4. Fund manager’s expertise and experience
  5. Personal investment goals measured against fund objective

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