A Beginner’s Guide To Flexi Cap Funds And Its Investment Benefits

To be precise, Flexi cap funds invest in small cap, midcap and large cap stocks. Fund managers of such schemes vary the corpus allocation across these three categories to generate maximum returns for investors. In this article, we will be covering all details regarding such mutual fund schemes, including their benefits, taxation, etc., for you to make the right investments.

What Are Flexi Cap Funds?

As per SEBI guidelines, flexi cap funds will have to invest at least 65% of their assets in equity or equity-related instruments. Flexi cap mutual funds have a diversified portfolio as they allocate the investment corpus to equity shares of different companies across all market capitalisations. As a result, such funds can mitigate portfolio risk for investors seeking equity exposure. 

Unlike multi cap mutual funds, flexi cap funds do not need to invest a fixed percentage in large, mid and small cap stocks. In the case of such funds, a fund manager’s job is to estimate the potential growth of various firms irrespective of their size. After that, they are responsible to invest money in the right stocks to generate maximum returns for investors. 

Also Read: 10 Large Cap Mutual Funds That Can Be A Part Of Your Portfolio

Who Can Invest in Flexi Cap Funds?

Whether or not you should invest in flexi cap funds depends on various factors. The most important thing that you must remember about mutual fund investments is what you want from them. Hence, it’s vital to identify your financial goals before allocating funds to flexi cap funds. In addition, you must assess your own risk-bearing capacity to find out if this type of mutual fund scheme is the right option for you. 

Also Read: How To Invest In Multi-Cap Mutual Funds

Why Invest in Flexi Cap Mutual Funds?

There are various reasons to invest in such funds. Please check the same below.

Corpus allocation

In the case of flexi cap funds, fund managers have the freedom to make investments across large, mid and small cap company stocks, to make maximum financial gains. Fund managers can provide stability by increasing the percentage of large cap stocks in the portfolio. That said, they may choose to focus on generating higher returns by increasing the exposure to small cap stocks. 

Mitigate risks

The flexibility in terms of asset allocation allows these funds to invest in large cap, mid cap, and small stocks. Accordingly, the portfolio risk gets reduced owing to diversification. Keeping the market scenario in mind, fund managers buy or sell stocks of various market caps and sectors to maximise investor’s wealth. 

Maximise opportunities across the market spectrum

A fund manager of the top flexi funds is constantly seeking opportunities in the market to achieve the scheme’s objective. They are trained professionals who analyse stocks and make investment decisions based on the market situation. 

Benefit of Asset Class

Equity investments have the capability to beat market inflation and generate incredible returns in the long run. Thus, flexi cap funds can help you achieve various long term financial goals. 

Also Read: Hybrid Mutual Funds: Types, Benefits, Risks & Returns

Taxation in Flexi Cap Funds

Taxation on equity funds like flex cap mutual funds are mentioned below.

Short Term Capital Gains 

These funds fall under equity-oriented schemes as they have to invest a minimum of 65% of their assets in equity. Now, returns realised within 12 months are known as short term capital gains (STCG). Such gains attract a tax rate of 15%. 

Long Term Capital Gains

If you make gains by selling your units after 12 months, the realised returns are taxed at 10%. Nevertheless, in case these returns do not exceed Rs. 1 lakh, they will not attract long term capital gains (LTCG) tax. 

Also Read: Taxation In Mutual Funds

When Should You Invest in Flexi Mutual Funds?

There is no specific time to invest in such funds as the individuals have different investment objectives. Furthermore, since the performance of equity funds are impacted by market volatility, you must decide whether your risk profile is suitable for such investments. After considering these aspects, do your research about the current market conditions and compare the different flexi cap funds to choose the best option. 

Things to Consider Before Investing in Flexi Cap Funds 

Besides identifying your financial goals and assessing your own risk profile, it’s essential that you take the following things into account before investing in the best flexi cap funds:

Expense ratio

This refers to a charge that asset management companies impose on investors on an annual basis. Fund houses levy this fee to cover the cost of managing the mutual fund scheme. Make sure to compare the expense ratio of the top flexi cap funds before making a decision. 

Experience of the fund manager

Fund managers of flexi cap funds take all buy-and-sell decisions after doing research and analysis. Accordingly, the performance of a scheme depends on the competence of the fund manager. Thus, it is vital for you to check the track record of the fund manager when investing in a fund. 

Past returns

By looking at the past returns of a flexi cap fund, you can find out if the mutual fund scheme’s scheme has been consistent. Also, you can know how the fund has performed in different phases of a market cycle. That said, note that the past performance of a fund does not give any indications regarding future returns. 

How to Invest in Mutual Funds with Navi?

First, download the Navi app from Google Play Store. After that, you can park your savings in any of the various mutual fund schemes offered by Navi. You can start investing by spending just Rs. 500 through an SIP. Else, you can opt for a lump sum investment. At Navi, you will also get an opportunity to invest in the top 50 companies through the Navi Nifty 50 Index Fund. Mentioned below are the benefits that you will enjoy here.

• Easy UI (user interface)
• Lowest expense ratio
• No transaction fees
• 100% paperless documentation without any transaction fees

Thus, you will get a lot of benefits by using this app.

Final Words

Flexi cap funds can generate maximum returns for investors by making most of the opportunities that may arise across different sectors. Furthermore, the portfolio risk gets mitigated as these schemes can invest in stocks of all market capitalisations without any restrictions. Thus, if you are looking for an option that provides equity exposure while balancing the risk and return aspects efficiently, flexi cap funds are certainly worth considering.

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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully before investing.

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