Multi Cap Funds: Diversified Equity Fund Investment

What is a Multi-Cap Mutual Fund?

A multi-cap fund is an equity mutual fund that invests in small-cap, mid-cap, and large-cap companies. A minimum of 25% of the portfolio is invested across all market caps.

Advantages of Multi-Cap Mutual Fund

Diversification

With investment across market caps, you get a diversified portfolio of some of the top companies in the stock market.

Enhanced return potential

You can benefit from the increased return potential of small and mid-cap stocks while enjoying the stability of large-cap stocks.

Professional fund management

Multi-cap mutual funds are actively managed schemes wherein the fund managers try to mitigate risks and enhance returns.

Flexibility Across Market Cycles

The ability to invest dynamically across large, mid, and small-cap stocks allows the fund manager to adapt to different market conditions and potentially optimise returns.

Multi-Cap Mutual Funds Returns Calculator

REGULAR INVESTMENT

SIP

Invest systematically in regular amounts and build a corpus with a disciplined investing habit.

ONE TIME INVESTMENT

Lump sum

Invest once with the facility of lump sum investing and save at your will. Time the market correctly and earn good returns.

INVEST AMOUNT

PERIOD

RETURNS

Total Amount Invested

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after 30 years you will get a return of

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Disclaimer: Projections/estimations is backtested using historical data.

TARGETED RETURN VALUE

INVESTMENT PERIOD

RETURNS

Total Amount Invested

₹ 0

after 30 years you will get a return of

₹ 0

Disclaimer: Projections/estimations is backtested using historical data.

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Understanding Multi-Cap Mutual Funds

Table of Contents

What are multi-cap funds?What are the features of multi-cap funds?What is the meaning of market capitalisation?What are the different types of multi-cap mutual funds?What should be the investment horizon for multi-cap funds?What is the tax implication of multi-cap funds?What are the payout options?

What are multi-cap funds?

Multi-cap mutual funds are diversified equity mutual funds which invest at least 25% of their portfolio in equity securities of companies in each market capitalisation.

What are the features of multi-cap funds?

Allocation in small, mid and large-cap equity securities
High risk-return trade-off
Suitable for investors with a long-term investment horizon
Invest through SIPs or lump sum
Earn tax-free returns up to Rs.1 lakh if you stay invested

What is the meaning of market capitalisation?

Market capitalisation means the total value of a company’s shares

The total number of listed shares is considered for calculation

The current market value is taken to calculate the market cap

Formula -
Market capitalisation = total number of outstanding shares X current market value per share

What are the different types of multi-cap mutual funds?

Concentrated on large-cap stocks

These funds primarily invest in large-cap stocks and secondary focus is on small-cap and mid-cap stocks. These are relatively safer as they avoid the volatility of small-cap and mid-cap stocks.

Small Cap/Mid Cap Funds Concentrated Funds

These are funds that focus highly on small-cap or mid-cap stocks and try to make the most of their growth potential. Meanwhile, the large-cap part is only a cushion against volatility.

No Specific Concentrations

These funds pick and choose investments across market capitalisations while focusing only on the potential of these stocks to outperform and provide you with considerable returns.

What should be the investment horizon for multi-cap funds?

A long-term investment horizon is suitable
You can invest for 5 years or above for attractive returns
You also get a tax benefit on staying invested for a longer tenure

What is the tax implication of multi-cap funds?

Returns up to Rs.1 lakh are tax-free if you stay invested for 12 or more months
Returns exceeding Rs.1 lakh are taxed at 10%
For redemption within 12 months, returns are taxed at 15%
Dividends earned, if any, are taxed at your income tax slab

What are the payout options?

Dividend option

Earn dividends on your investment at regular intervals
Growth option

Accumulate the returns over the investment tenure and get a lump sum amount on redemption

FAQs On Multi-Cap Mutual Fund

Since multi-cap funds are equity investments, they have the potential to be volatile in the short run. If you plan to invest long-term, the risk decreases significantly.

Multi-cap funds are equity investments that perform better in the long run. It is generally advised to stay invested in them for 5-6 years to reap better benefits.

• First-time Investors: A first-time investment should ideally bring enough of a sense of security and safety along with the shining potential of returns. Multi-cap funds can provide the right balance for your initiation.

• Investors in a dilemma: If you are confused as to the market capitalisation you should invest in, multi-cap funds are your go-to, as they will provide you with a balanced, all-round experience across market caps.

• Investors with a long-term investment horizon: If you stay invested for 5+ years in multi-cap funds, the benefits of compounding could serve you well. If this horizon aligns with your financial goals, multi-cap funds are for you.

• Investors seeking mid and small-cap exposure without taking too much risk: With any kind of concentration, multi-cap funds offer you a minimum cushion of large-cap funds against the volatility of mid-cap and small-cap funds .

Multi-cap funds maintain a diverse mix, including small-cap, mid-cap, and large-cap companies. Flexi-cap funds, on the other hand, are known as open-ended, dynamic equity funds without any market capitalisation mandate.

Like all equity investments, the suitability of both these funds is subjective. Multi-cap funds with greater mid-cap and small-cap components suit investors with an investment horizon of 5-7 years and high-risk appetite. Meanwhile, flexi-cap funds focusing on large-caps suit investors with a similar horizon but a lower risk appetite due to lower market volatility risk.

You can invest in multi-cap funds either through SIP (Systematic Investment Plan) or a lumpsum amount or a lumpsum amount. You can start your SIP at as low as ₹100. However, please confirm the specific minimum investment limit with your fund house.

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Multi-Cap Mutual Funds