Multicap Funds

Definition: These are diversified mutual funds which can invest in stocks across market capitalization. In other words, they are market capitalization agnostic. These funds resort to portfolio gyrations commensurate with the market condition.

Description: These funds invest in stocks across market capitalization. That is, their portfolio comprises of large cap, midcap and small cap stocks. They are relatively less risky compared to a pure mid cap or a small cap fund and are suitable for not-so-aggressive investors.

Benefits of Multicap funds: Multi-cap funds can shift their portfolios across market caps. They can hold large-cap or mid-cap stocks, or a mix of both. More importantly, they can take exposure to any type of stocks at the opportune moment. When valuations of large-cap stocks are more attractive, as was the case in 2015 after the initial correction, multi-cap funds took exposure there. In 2013 there was an opportunity to invest in quality midcaps at reasonable valuations. The ability to move across market caps at the opportune moment gives these funds an edge. For the retail investor, this means that he doesn’t have to worry about which market cap to invest in. By investing in a multi-cap fund, the retail investor can leverage a fund manager’s expertise in terms of taking market cap and sector related calls.

Source: Economic Times

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