What is the difference between Flexi Cap and Multicap Fund? Where will you get more returns and less risk, know expert opinion

In flexi cap, at least 65 percent has to be invested in equities. In multicaps, at least 75 percent has to be invested in equities.

Flexi Cap was launched in November 2020 and currently has an AUM of 2.2 lakh crores.

The returns on traditional means of investment are getting less, due to which the craze of investors is decreasing. investors at the moment mutual fund ,Mutual funds) because the returns are higher here. Financial experts say Investing in Youth and Millennials Mutual Funds ,Mutual fund investment) prefer to do. they are especially Equity Mutual Fund ,Equity mutual funds) as it has higher returns, although the risk is also higher. In such a situation, diversification within equity funds is also necessary, which will reduce the risk. Koppr Co-founder and CEO Mandar Marathe says that investors should always invest for the long term.

By making long term investments, the returns also get compounded and the risk is also reduced. India’s economy is going to grow rapidly in the future. In such a situation, investing for the long term can get the full benefit of the growth of the economy. Apart from this, keeping the equity portfolio diversified also reduces the risk. Overall, experts recommend diversified equity investment which is the best way to invest.

Know the difference between Flexi Cap and Multicap

Let us know what is the difference between Flexi Cap and Multicap Fund. Which is better to invest in both where investors get more returns and less risk. Marathe said that in flexi caps, it is necessary to deposit at least 65 per cent in equity or equity related instruments, while in multicap it is necessary to invest at least 75 per cent in equities. However, there are different conditions regarding this.

Features of Flexi Cap Fund

  1. An example of diversified equity investment in mutual funds is flexi cap funds. In view of the demand of investors, market regulator SEBI created the category of mutual funds in 2017. Keeping in mind the convenience of the investors, different categories of funds have been prepared. Flexi Cap was launched in November 2020. In this, fund managers can invest in stocks of different market caps.
  2. SEBI has fixed different exposures for midcap, smallcap and largecap mutual funds. However, the Flexi Cap does not have any fixed allocation. The fund manager can adjust the investment in different categories as per the requirement to give you higher returns. As the name suggests, the fund manager is flexible about investing in Flexi Cap. Your money is invested where it gets higher returns.
  3. In flexi cap, the fund manager will have to invest only 65 per cent in equities. It is open ended. In this, the fund manager can invest in a company with any kind of market cap. This company can be any in largecap, midcap and smallcap.
  4. Flexicap returns are compared with Nifty 500 or BSE 500. Talking about Flexi Cap, up to 70 percent is invested in largecap, up to 18 percent in midcap and 12 percent in smallcap companies. The fund manager invests most of your money in large cap companies. If necessary, investment in smallcap and midcap companies is increased or decreased.
  5. The advantage of this is that when the volatility in the market is sharp, then midcap and smallcap companies are most affected. Both of these have a weightage of up to 30 per cent in Flexicap funds. In this way the risk is reduced. The total AUM (Asset Under Management) of the Flexicap category as of January 2022 was Rs 2.2 lakh crore.
  6. Talking about flexicap funds, the risk is higher as compared to large cap funds. However, the risk involved is very less as compared to smallcap and midcap funds. One can also invest in International Funds under Flexi Cap.

Features of Multicap Fund

  1. Talking about multicap funds, in this, your money is invested equally in large, mid and smallcap. The benchmark of Multicap Fund is Nifty 500.
  2. As per SEBI rules, minimum investment in largecap, midcap and smallcap is necessary in multicap funds. According to the rules, it is mandatory for a multicap fund to invest 25-25 percent in all three types of companies. In this way, at least 75 percent is invested in equities.
  3. In any case, 75 percent investment in the market is necessary in multicap funds. It doesn’t matter what the state of the market is. This gives the advantage of stability of largecaps, as well as higher returns of midcaps and smallcaps.
  4. The manager of a multicap fund does not have much flexibility to vary the equity allocation. As of January 2022, the asset under management of Multicap Fund was Rs 43 thousand crores.
  5. In most of the multicap funds, the fund manager slightly increases the investment in largecap companies and keeps the investment in smallcap, midcap limited. This reduces the overall risk of the fund slightly and brings stability.

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