Investing in flexi-cap funds: Balancing risk and reward

Investing in the stock market is a lot like embarking on a journey full of adventures. And just like the right vehicle can make your trip smooth and enjoyable, opting for flexi cap funds can help you navigate through the twists and turns of the market in a much better way.

Much like a car with an adaptable suspension that adjusts to the terrain, flexi cap funds can invest in companies of different sizes and sectors based on market conditions. This quality of flexi cap funds can help investors gain better returns while minimizing the risk, thereby helping them sail through market volatility without much hassle.

• Table of contents

1. What are flexi cap funds?
2. Navigating the investment landscape with flexi-cap funds
3. Understanding the key features of flexi-cap funds
4. Taxation on flexi-cap funds
5. FAQ

What are flexi cap funds?

Flexi cap funds are a type of mutual fund that provide investors the flexibility to invest in companies across varying market. Flexi cap funds can allocate their assets across the entire market spectrum. and invest in large-cap, mid-cap, and small-cap stocks based on the fund manager's evaluation of market conditions. The fund manager's expertise in selecting stocks across different market segments plays a significant role in achieving these objectives.

Navigating the investment landscape with flexi-cap funds

Flexi-cap funds have the ability to adapt themselves to market conditions and invest in companies of any size, without any fixed allocation to large, mid, or small-cap stocks. Moreover, these funds can invest in a diversified portfolio of stocks, depending on the market conditions and the fund manager's discretion.

In simple terms, flexi-cap funds can pivot their investments based on the market outlook, which makes them an attractive option for investors who want a mix of growth and stability in their portfolio. With the flexibility to invest in companies of different sizes and sectors, these funds offer a balanced approach to investing, allowing investors to benefit from different market trends.

Let's take an example: suppose the fund manager of a flexi-cap fund anticipates a bullish market for mid-cap companies. In that case, the fund can increase its allocation to mid-cap stocks to capitalize on the potential growth opportunities.
On the other hand, if the fund manager expects a bearish market, the fund can pivot to large-cap stocks, which may offer stability during market downturns.
Overall, investing in flexi-cap funds can provide investors with a diversified portfolio that adapts to market conditions, making them a popular investment option for many.

Understanding the key features of flexi-cap funds

Flexi-cap funds are an attractive option for investors looking for a diversified portfolio with flexible investment strategies. Let's look at some key features:

• These funds invest across the market capitalization spectrum, including large, mid, and small-cap companies. As a result, they offer a wider range of investment opportunities to investors and reduce concentration risk.
• One of the key features of flexi-cap funds is their ability to change their asset allocation as per the market conditions. They have the flexibility to invest across sectors and companies based on market trends and valuations, thereby optimizing returns for investors.
• Another advantage of flexi-cap funds is that they are actively managed by fund managers who have the expertise and experience to identify profitable investment opportunities. This helps in creating a well-balanced portfolio that has the potential to maximise returns while minimizing risks.
• Flexi-cap funds are a suitable investment option for investors who have a long-term investment horizon and are willing to withstand market volatility. They offer the potential for higher returns compared to other fixed-income investment options in long term, while minimizing risks through diversification.

Investing in flexi-cap funds requires careful analysis of the fund's investment strategy, past performance, and fees. Investors should also consider their investment goals, risk appetite, and investment horizon before investing in these funds. Overall, flexi-cap funds can be an excellent addition to an investor's portfolio, offering a combination of diversification, flexibility, and potential for higher returns.

Taxation on flexi-cap funds

As with any other mutual fund, the taxation on flexi cap funds in India is based on the holding period of the investment. If an investor holds a flexi cap fund for more than one year, it is considered a long-term capital gain (LTCG). The current LTCG tax rate on equity mutual funds, including flexi cap funds, is 10% for gains over Rs.1 lakh in a financial year. However, if an investor sells their investment before one year, it is considered a short-term capital gain (STCG), and the tax rate is 15%. In addition to the capital gain tax, the dividend income is taxable at the hands of the investors based on their tax slab.

In conclusion, flexi-cap funds are a popular investment option for those seeking flexibility and diversity in their portfolio. With the ability to invest in companies of any size and sector, they offer the potential for high returns over the long term. It’s always advisable to seek advice from a financial expert before making any investment decision.

FAQs:

What is flexi cap fund meaning and what are the benefits of investing in it?
Flexi cap fund are the funds that can adapt to changing market conditions. With flexi cap funds, you can get the flexibility to invest across market capitalizations and sectors, thereby diversifying your portfolio. This can further help reduce the risk associated with your investment and increase the possibility of generating better returns.

What is the objective of flexi cap funds?
The objective of flexi cap funds is to help investors generate long term capital appreciation by investing in diversified portfolio of stocks.

What are the risks associated with flexi cap funds?
Flexi cap funds carry market risks, sectoral risks, concentration risks. Market risk can lead to a decline in the Net Asset Value of the fund. Sectoral risk can impact the performance of the fund due to adverse development in particular sector. Whereas concentration risks arise when the fund holds a significant portion of its assets in a few stocks.

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.