What is the meaning of flexi cap mutual funds?

Flexi cap funds are a category of mutual funds that offer a lot of flexibility to the fund manager in terms of asset allocation across large, mid, and small-cap stocks. The primary goal of flexi cap funds is provide investors with an enhanced opportunity to generate wealth by capitalising on the ever-changing market conditions.

Flexi cap fund managers have the discretion to move assets to where the growth potential appears most promising. This dynamism makes flexi cap funds an attractive option for investors who are keen on tapping into the benefits of diverse market caps without being rigidly bound to one.

How flexi cap funds work

Unlike other mutual funds, like multi-cap funds, which are mandated by the Securities and Exchange Board of India (SEBI) to stick to a particular market capitalisation, flexi caps are not confined by any such restrictions. However, for a scheme to be categorised as flexi cap, it must hold at least 65% of its assets in Indian equities. Flexi cap funds are a versatile investment vehicle that can adapt to varying market conditions to offer a potential growth advantage to investors.

Key features of flexi cap funds

1. Diverse investment strategy: One of the main attractions of flexi cap funds is their diversified investment approach. While some mutual funds might focus solely on large or mid-sized companies, flexi cap funds can shuffle investments based on where they see value, irrespective of the company's size. By using an SIP calculator online, investors can project the potential growth of their investments in flexi cap funds, helping them understand how their diversified contributions could perform over time and whether it aligns with their financial objectives. This tool can assist in adjusting the SIP amounts based on expected returns from such flexible investment strategies.

2. Dynamic asset allocation: Flexi cap funds are actively managed. This means the fund manager continually assesses market conditions and adjusts the asset allocation accordingly. If the mid-cap segment shows potential, assets might be shifted there; or if large caps seem promising, then investments can be adjusted in that direction.

3. Risk and returns: Flexi cap funds invest in fast-growing companies in up-and-coming industries to give you potentially reasonable returns on your investment. But their versatility ensures that they are neither fully exposed to the volatile movements of smaller stocks nor entirely dependent on the often-sluggish movement of large caps. The key is to stay invested for the long haul and get potentially better risk-adjusted returns instead of worrying about short-term market movements.

4. Broad market exposure: Investors gain exposure to different segments of the market. Whether it's the stability of large-cap stocks or the growth potential of small caps, flexi cap fund investors can potentially enjoy the best of both worlds.

5. Adaptable to market conditions: Due to their flexible nature, flexi cap funds are well-equipped to adapt to various market conditions. If there's a downturn in one market segment, the fund manager can shift focus to another segment that shows promise.

6. Liquidity and taxation: Like most mutual funds, flexi cap funds also offer good liquidity. The tax implications for flexi cap funds are like those of other equity mutual funds

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.