The Ultimate Guide To Multicap Mutual Funds

Dec 13, 2021

While everyone knows the value of investing in mutual funds by now, sometimes new schemes and new funds can sometimes create confusion in an investor’s mind. If you’re still investing with only debt and equity mutual funds, its time to diversify your portfolio with more agile funds that are suited to your needs and can deliver better results.

What Are Multicap Mutual Funds -

It is here that Multicap Mutual Funds come in. This type of mutual fund invests in multi-cap firms that could belong to any of the following types, be it large-cap, mid-cap or small-cap companies. This distinguishes Multicap Mutual Funds from other funds as the fund manager can distribute wealth across three types of firms instead of being restricted to just one group of companies between large, mid and small-caps.

Most other mutual funds are restricted to invest in one type of company because of their market capitalisation. For example, a large-cap fund can only invest in companies with the biggest market capitalisation. However, if an investment opportunity arises in the small-cap or mid-cap space, the fund manager cannot put in money into those firms.

Multicap Mutual Funds addresses this issue and gives the fund manager the complete freedom to invest whenever any type of opportunity, regardless of the size of the company.

Types of Multicap Mutual Funds –

While we’ve explained how Multicap Mutual Funds can be used to invest in any rising sector or company, some schemes follow certain guidelines, making it easier for investors to understand how their investment will be diversified.

1 – Large-Cap Focussed – For a long time, Multicap Mutual Funds focussed on investing in large-caps because of their stellar record and being a safe haven. It’s an approach that some Multicap Mutual Funds still follow so if you’re an investor who believes in India’s biggest companies such as Reliance or TCS for example, you could look at this type of fund that puts in a large chunk of your investment in such companies.

2 – Mid and Small-Cap Focussed – It’s old news now that mid-caps and some small-cap stocks have actually outperformed the broader market. If you’re open to investing in such companies with a smaller portion in large-caps to cushion any headwinds, this could be the fund type for you to invest in.

3 – Market Mover – This type of fund stays true to the original idea of Multicap Mutual Funds with the fund manager moving your investment where maximum profit is to be found. Choose your fund type based on your risk appetite and the specific fund’s track record.

Pros And Cons Of Multicap Mutual Funds –

Now that you know what Multicap Mutual Funds bring to your investment portfolio, its time to assess the pros and cons of investing in them.

Starting with the pros, we’ve already outlined the biggest investment problem that Multicap Mutual Funds can solve to maximise profit on your investment. In fact, if wealth creation is your raison d’etre of investing in mutual funds, you can hardly do better than Multicap Mutual Funds that works to deliver exactly on that promise.

The fund would work by delivering stellar returns when the market is in a bull run from small-caps and mid-caps while large-caps will protect your investment during a bear market phase.

The con, or the major risk with Multicap Mutual Funds, is that the fund manager needs to be extremely agile to be able to identify and understand market trends.

This also means that the entire duration you’re invested in this fund could turn out to be a volatile period with money changing hands at regular intervals, based on the fund manager’s assessment. Only an investor who can stomach volatility would benefit from Multicap Mutual Funds in the long run rather than someone who might be tempted to cut losses and exit at the first sign of trouble.

Which Multicap Mutual Fund To Consider?

If you’re looking to invest in Multicap Mutual Funds, Axis Mutual Fund recently launched an NFO.

Managed by veterans Anupam Tiwari and Sachin Jain who have a combined experience of 24 years between them, the Axis Multicap Fund will track Nifty 500 multi-cap stocks to invest in.

The fund will invest minimum 25% in small, mid and large-cap stocks with the remaining 25% to be dynamically allocated as per market trends.

If you’re the type of investor who is seeking long-term wealth creation and has a high-risk appetite, Axis Multicap Fund can be a good option for you.

You can invest a minimum of INR 5000 and in multiples of Rs. 1 thereafter in the NFO. You can invest in the scheme through your registered mutual fund agent or directly here.