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Flexicap funds are multi-cap funds that invest at least 65 percent of their corpus funds in companies across the market capitalization range, including large-cap, mid-cap, and small-cap enterprises. So this means that the fund manager invests all your money into different equity caps and has complete control to limit or maximax the risk according to the scenario. Investors can probably mitigate their risks and lower volatility by investing in such funds.
Why invest in the flexicap fund?
- Minimizes risk- Flexicap funds provide many options for investing in all sectors and companies. This leads to a great portfolio adjusted as per our reward to risk ratio.
- Diversification- Felxicap funds help us diversify our portfolio by investing across all market capitalization. This is usually useful when there is a boom or crash in the market. When there is a bull run or a bear run, the small-cap companies typically grow or dip the most since they are the most volatile. Whereas the large-cap companies usually are very stable and thus can protect from volatility.
- More Opportunities- The fund manager has the flexibility to invest across all market caps. This gives the fund manager the power to tap on all the opportunities across market caps.
- Defeats inflation- Investing in equity has the potential to beat inflation in the long run. Historically equity has the highest returns and has beaten inflation.
How are flexicap taxed?
Flexicap are taxed in two ways, they are
- Short-term capital gains tax(STCG)- You will be taxed 15% of your profits if the investment is withdrawn within one year of investment.
- Long-term capital gains tax(LTGC)- You will be taxed 10% of your profits if the investment is withdrawn after one year of investment.
Is it a good investment?
Flexicap funds offer a greatly diversified portfolio to balance the risk and return aspects. These funds are known to deliver a steady rate of return throughout the year, even when the markets are crashing. Further, the fund manager has control over all the investment decisions; this gives him the power to grab an investment opportunity across all types of companies. The fund manager can also withdraw an investment if he finds it no longer attractive and can use that money to invest in a more lucrative investment.
Because these funds invest across market cap segments, they provide investors with both growth and value at the same time, achieving a balance of risk and volatility in a single portfolio. This provides the investors with a dual opportunity to invest their money in the best-performing company. On the other hand, their money is withdrawn from nonperforming investments to invest in more lucrative options.
Are flexicap suitable for you?
Flexi-cap funds are best for investors who want to put their money in for a five-year or more extended period to achieve a long-term financial goal. It is also ideal for someone who wants to invest their money in equity without taking much risk or knowledge of equity markets. Due to its flexibility, it attracted investors' attention, and it became the second-largest equity mutual fund category after large-cap funds.
To conclude, investors who want to achieve excellent long-term returns with low risk can invest in flexicap funds. Flexicap funds also grab opportunities across all the market caps to maximize the returns and lower the risk. It also helps investors achieve a diversified portfolio.