How flexi cap funds provide diversification in portfolio allocation

flexi cap fund portfolio
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Mutual funds in the Indian market offer a vast spectrum of investment options. A great example of a versatile mutual fund are flexi cap funds. These funds are a type of mutual fund that offers investors the flexibility to invest in companies across different market capitalisations. Unlike other funds that focus on specific categories – like large-cap, mid-cap, or small-cap stocks – flexi-cap funds have the freedom to allocate their assets across the entire market spectrum.
Let’s take a detailed look at flexi cap funds, their advantages and role in portfolio diversification, and the factors to consider before investing in them.

  • Table of contents:
  1. Understanding flexi cap funds
  2. Benefits of investing in flexi cap funds
  3. Portfolio diversification with flexi cap funds
  4. Factors to consider before investing in flexi cap funds
  5. Who should consider investing in flexi cap funds?
  6. Bajaj Finserv Flexi Cap Fund
  7. FAQ

Understanding flexi cap funds

A flexi cap fund is a category of mutual funds that focuses on investing in companies regardless of their market capitalisation. This type of mutual fund offers flexibility to the fund manager to switch the investment across companies of varied market capitalisations.
This means that the fund manager of a flexi cap fund has the discretion to invest in large-cap, mid-cap, and small-cap companies based on their perception of the market conditions and the potential of specific stocks. This also explains why these mutual funds go by the name ‘flexi cap’, which signifies flexible capitalisation.
In addition, the allocation can be adjusted dynamically as per changing market trends and the fund manager's investment strategy. This allows flexi-cap funds to provide investors with the advantage of diversification, as they can tap into the growth potential of companies of varying sizes.

Benefits of investing in flexi cap funds

Investing in flexi cap funds seeks to offer multiple benefits:

  • Flexibility: Because the fund manager of a flexi cap fund has the freedom to switch investments across different market caps, these funds can adapt to changing market conditions, providing potential advantages to investors.
  • Diversification: Due to their investment across different market caps, flexi cap funds offer better portfolio diversification compared to other equity funds.
  • Return potential: Given their wide investment mandate, flexi cap funds have the potential to deliver long term growth, although it is important to remember that this comes with relatively increased risk.

Portfolio diversification with flexi cap funds

The flexi cap fund investment portfolio is typically well-diversified across different market caps and sectors. This kind of diversification helps to mitigate risk from equity investing perspective. When one sector or company does not perform well, the performance of other sectors or companies in the portfolio can balance out the negatives, leading to potentially less volatility. Hence, the objective of flexi-cap funds is to generate long-term capital appreciation by investing in companies with high growth potential.
The fund manager's expertise in selecting stocks across different market segments plays a crucial role in achieving these objectives.

Factors to consider before investing in flexi cap funds

Before investing in flexi cap funds, investors need to keep the following factors in mind:

  • Risk tolerance: Given the fund manager's flexibility to switch investments across market caps, the level of risk in flexi cap funds can fluctuate. Investors must ensure that their risk tolerance aligns with the approach of the fund.
  • Investment horizon: As flexi cap funds invest predominantly in equities, they are suitable for investors with a long-term investment horizon.
  • Fund house and portfolio manager: The reputation of the fund house and the experience and track record of the fund manager can be good indicators on how the fund will be managed.

Who should consider investing in flexi cap funds?

Flexi cap funds are most suitable for investors who have a high risk tolerance and a long-term investment horizon. They are also ideal for investors who would like to invest in equity funds but do not want to get into the complexities of deciding the suitable market cap to invest in.

Bajaj Finserv Flexi Cap Fund

If you’re looking to invest in a flexi cap fund, you can consider the Bajaj Finserv Flexi Cap Fund by Bajaj Finserv AMC. This is an open ended equity scheme investing across large cap, mid cap, small cap stocks, suitable for investors who are seeking wealth creation/capital appreciation over the long term.

Flexi cap funds, with their inherent flexibility and diversification, can be a significant addition to an investor's portfolio. While they offer several potential benefits, it is important for investors to assess their risk appetite and investment horizon before investing. As always, a good understanding of the fund house, the fund manager, and the flexi cap fund portfolio is crucial. Consulting a professional financial advisor can help you understand if flexi cap funds are a good fit for your portfolio. When chosen wisely, flexi cap funds can be a worthy addition of an investor's mutual fund portfolio.


What is portfolio diversification in flexi cap fund?

By investing in stocks across market capitalisation, flexi cap funds enable investors to diversify their portfolios. Additionally, they allow fund managers the adaptability to adjust the portfolio allocation basis market conditions.

In what ratio does Bajaj Finserv Flexi Cap fund diversify the portfolio

The asset allocation pattern for this fund is as follows: Equity and equity related instruments – Minimum 65% to Maximum 100% Debt and money market instruments – Minimum 0 to Maximum 35% Units issued by REITs and INvITs – Minimum 0 to Maximum 10% For more details, please refer the Scheme Information Document of Bajaj Finserv Flexi Cap Fund

Do flexi cap funds have lock-in periods?

Flexi cap funds are open-ended equity schemes with no set maturity or lock-in term. You can deposit a lumpsum or set up a Systematic Investment Plan (SIP) in any flexi cap scheme of your choice and redeem it as needed, subject to exit load.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.