Flexi Cap Funds are open-ended dynamic equity schemes that invest across large-cap, mid-cap and also small-cap stocks. Also, this fund allows investors to diversify their portfolios across market capitalizations, reducing risk and volatility. Moreover, this fund can invest in any stock regardless of market capitalization. In other words, it has to invest at least 65% of its assets in equity and equity-related instruments with no limit on market cap. Therefore, the fund manager evaluates the potential of various businesses, regardless of their size and allocates funds to various market sectors and businesses.
Learn: What are Flexi Cap Funds?
Which is the Best Flexi Cap Fund (Direct Plan)?
- Parag Parikh Flexi Cap Fund Direct Growth
- HDFC Flexi Cap Fund Direct Growth
- Franklin India Flexi Cap Fund Direct Growth
- Union Flexi Cap Fund Direct Growth
- JM Flexicap Fund Direct Growth
Which is the Best Flexi Cap Fund (Regular Plan)?
Flexi Cap funds invest 65% of their assets across equity and equity-related instruments of large-cap, mid-cap and small-cap stocks. The best flexi cap funds are:
- Parag Parikh Flexi Cap Fund Regular Plan
- Quant Flexi Cap Fund Regular Plan
- PGIM India Flexi Cap Fund Regular Plan
- UTI Flexi Cap Fund Regular Plan
- Union Flexi Cap Fund Regular Plan
Why Should You Invest in Flexi Cap Funds?
Flexi-cap mutual funds are diversified equity mutual funds that invest across different market caps. These funds have no restriction to invest in across a single market or a fixed percentage to invest. Thus, the fund manager has the liberty to pick the stocks that have high growth potential. Best flexi cap funds are ideal for long-term horizon (more than five years).
Best flexi cap funds aim long term capital appreciation by focusing on different industry segments. Since the fund portfolio is well diversified, the portfolio may have a lesser impact due to unexpected decline from a particular sector or stock. During market corrections or volatile scenarios, the fund manager can quickly rebalance the portfolio by reducing the exposure towards high-risk segments.
Pure large-cap funds, mid-cap funds and small-cap funds invest primarily across the specified market cap. While a flexi cap fund can invest across market capitalizations in the desired proportions. Hence, flexi-cap funds have high flexibility to invest, depending on the performance of a particular market segment, such as large-cap, mid-cap and small-cap.
To sum up, the best Flexi cap funds are dynamically managed, have comparatively less risk than pure mid-cap and small-cap funds, and offer a diversified portfolio suitable for long-term wealth creation.
Best Flexi Cap Fund Returns Calculator
Using Scripbox’s SIP and Lumpsum Calculator, let’s estimate the potential returns from the best flexi cap fund. Let’s assume Mr Kedar plans to invest in Parag Parikh Flexi Cap Fund. He can either invest INR 10,000 per month through the SIP route and plan to increase investment by 10% yearly. Or INR 3,00,000 as a lump sum. His investment tenure is 10 years. Let’s look at the potential returns for both scenarios.
SIP Investment:
By investing INR 10,000 per month and with a 10% step up each year, Mr Kedar can potentially generate INR 43,44,633 for a total investment of INR 19,12,491.
Lumpsum Investment:
By investing INR 3,00,000 as a one-time investment, Mr Kedar’s investment value at the end of the investment tenure (10 years) may potentially be INR 14,05,499.
Note: The return estimation is based on past performance. This doesn’t guarantee any returns.
Explore Scripbox’s SIP Calculator and Lumpsum Calculator
How to Choose the Best Flexi Funds?
The following are the parameters that you must consider while choosing the best flexi cap funds:
- Investment Objectives
While picking the best flexi cap funds, you need to ensure the fund’s investment objective aligns with your investment goals. The slightest mismatch in the alignment may lead to undesirable consequences. Thus, you need to analyze your investment goals and determine if they align with the fund’s investment objective.
Furthermore, these funds require a long-term investment horizon to enjoy significant growth. Therefore, you need to ensure that you stay invested for longer durations.
- Investment Risk
Since flexi cap funds invest across different market capitalizations, you need to be aware of the potential risks. Though exposure to large-cap stocks may ensure stability, investment across mid-cap stocks and small-cap stocks may be risky. At the same time, these stocks have the potential to generate high growth in comparison to large-cap stocks. Thus, analyze the portfolio holdings and check if you are comfortable with the portfolio allocation.
- Returns
The past performance of a mutual fund doesn’t guarantee future returns. However, past performance is a very good indicator of how the fund has performed across different market cycles. Comparing the fund’s performance against its benchmark and peers will help understand its stability. A fund that consistently outperforms its category and benchmark is worth investing in if all the other parameters are also in its favour.
- Performance Ratios
Mutual fund performance ratios like beta, standard deviation, Sharpe ratio, Treynor’s ratio, etc., help analyze the fund’s performance and volatility against its benchmark. Thus, while picking the best flexi cap fund to invest in, ensure you are also analyzing all the mutual fund performance ratios.
- Expense Ratio
The expense ratio plays a significant role in the overall returns from your mutual fund investments. The expense ratio is the fees the AMC charges for managing the fund. The higher the expense ratio, the lower your returns will be. Thus, when choosing the best flexi cap fund, you should pick a fund with a lower expense ratio.
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Frequently Asked Questions
What are Flexi cap funds? Flexi cap funds are diversified equity mutual funds that invest at least 65% of their corpus across equity and equity related instruments of large cap, mid cap and small cap stocks.
How are Flexi cap funds taxed? Flexi cap funds are taxed liked equity mutual funds. The short-term capital gains are taxable at 15% when the investment holding period is less than one year. When the holding period is more than 1 year, the long-term capital gains above INR 1,00,000 are taxable at 10%.
Who should invest in Flexi cap funds? Investors who understand and are comfortable with exposure across large-cap, mid-cap and small-cap stocks can consider investing in these funds. Furthermore, investing in flexi cap funds requires a long-term investment horizon to enjoy significant growth.
Is it a good time to invest in Flexi Cap Funds? There is never a good time to invest in the markets. Investing through SIP helps average out the market volatility and generate significant growth in the long term.
Why Flexi Cap Funds can be the best choice for your portfolio? Because they invest across different market caps, giving a diversified portfolio for investors.
How long should I stay invested in Flexi Cap Mutual Funds? Flexi-cap mutual funds are pure equity schemes that invest at least 65% of their assets in equity and equity-related instruments. Thus, a long-term investment horizon of 5 years or more is recommended while investing in these schemes.
Where do Flexi Cap Mutual Funds invest? Flexi-cap funds invest 65% of their corpus in equity and equity-related instruments, with no restriction on market capitalization. Thus, the fund manager is free to invest across high-growth and stable stocks.
Are Flexi-Cap Mutual Funds high risk? Yes, since flexi-cap funds are pure equity schemes, they are high-risk investment options.
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