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0 Flexi-cap mutual funds are a type of mutual fund that invests in companies of all market capitalisations, including large-cap, mid-cap, and small-cap companies. As per SEBI rules, flexi-cap mutual funds must invest at least 65% of their assets in equity and equity-related instruments. Unlike traditional mutual funds that have to follow stricter guidelines on where to invest, flexi-cap funds offer a high level of diversity and flexibility regarding investments.
Advantages of flexi-cap funds over traditional funds
Let’s take a look at some of the key advantages that flexi-cap mutual funds offer over traditional mutual funds:
High level of flexibility in investments
As compared to traditional mutual funds, flexi-cap funds offer a high level of flexibility in investments. Traditional funds often have to follow set rules when it comes to investing in stocks of any particular market capitalisation. On the other hand, fund managers of flexi-cap funds can invest across large-cap, mid-cap and small-cap stocks in varying proportions. This flexibility allows fund managers to change their investing strategy based on ever-evolving market and economic conditions.
Improved risk management through diversification
Flexi-cap mutual funds offer improved risk management through higher diversification, compared to traditional mutual funds. In times of market volatility, fund managers have the discretion to adjust the investment portfolio of flexi-cap funds towards stable and safer equity investments. On the other hand, when the market experiences high growth, fund managers can pivot their investments towards rapidly growing sectors, thus benefitting from a high level of diversification.
Flexi-cap funds capture all segments of the market
Unlike some traditional mutual funds (sector funds or thematic funds that focus on buying stocks of a particular sector, or large/small/mid-cap funds that focus on market capitalisation), flexi-cap mutual funds allow investors to invest across all industrial sector and market segments. This ability to invest in multiple sectors and market capitalisations allows investors to benefit from growth across various segments in the rapidly growing Indian economy.
Fund managers have more freedom
Fund managers of flexi-cap mutual funds have broader freedoms, meaning they can exercise their expertise more frequently and effectively as they are not hindered by strict asset allocation rules or requirements. This allows flexible-cap fund managers to make innovative investment choices and quickly respond to changing market conditions by rebalancing the fund’s portfolio. In a rapidly changing economic market like India, this freedom and adaptability of flexi-cap funds is highly advantageous over traditional mutual funds.
Flexi-cap mutual funds offer a comprehensive investment solution
As flexi-cap mutual funds are not strictly bound by asset allocation requirements, they can combine the high-growth potential of smaller companies with the stability of established large-cap organisations. Unlike traditional mutual funds, flexi-cap funds allow investors to invest in all sectors and segments of the market, whether large-cap, small-cap or mid-cap, ensuring that investors can make a comprehensive investing strategy with funds allocated across all sectors for diversification.
To conclude
Flexi-cap mutual funds are an attractive investment choice compared to traditional mutual funds, considering that they offer higher flexibility and diversity, and allow investors to reach all segments of the markets. However, investing in flexi-cap mutual funds is not devoid of risk, and investors are recommended to thoroughly research the risks involved before investing.
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