Stocks are divided into categories based on the market capitalization of the publicly listed companies they represent. There’s the small-cap category that includes up and coming companies in their nascent stage.
For example, Heidelberg Cements, Thyrocare Technologies, Rossari Biotech, and others. Then there’s the mid-cap category with solid businesses that aim to become industry leaders in the near future.
This includes the likes of AU Small Finance Bank, Glenmark, and others. Finally, there’s the large-cap category with iconic companies that have been around for decades. Think of TCS, Wipro, Reliance, and others.
The problem is picking stocks from each category. There are too many options and too much data to sift through. But there’s a solution: flexi-cap mutual funds.
What Is A Flexi-Cap Mutual Fund?
A flexi-cap mutual fund has the freedom to invest in stocks that fall under small, mid, and large caps. This philosophy allows top flexi-cap funds to create a diverse and potentially lucrative portfolio.
At the same time, flexi-cap funds have the freedom to modify their portfolio during volatile times. For example, adding more large-cap stocks and reducing exposure to small-cap stocks for better stability.
These factors are known to put flexi-cap funds a notch above other mutual funds that are tied down to a single cap, especially when it comes to diversification.
Fun fact: Flexi-cap funds were previously known as multi-cap funds.
Best Flexi-Cap Mutual Funds In 2022
Investing in a flexi-cap fund negates the need to buy multiple mutual funds across caps. As an investor, this means you can save time, effort, and money that would otherwise be spent on fund picking and fees.
That said, you still have to pick the right flexi-cap mutual funds from hundreds of scheme variations. An app like Cube can make this easy for you by giving you access to curated flexi-cap fund recommendations.
Cube works with Wealth First, a mutual fund advisor that’s been in the game for 20+ years. Here are the best flexi-cap funds for 2022 as handpicked by WF.
Flexi-cap Fund Name
SBI Flexicap Fund
HDFC Flexi Cap Fund
1. SBI Flexicap Fund
This top flexi-cap fund has been around since 2005 and manages a portfolio worth ₹15,449 crores. It has generated 13.28% returns over the past 3 years and 13.37% over the past 5 years.
Fund name: SBI Flexicap Fund
AUM: ₹15,449 crores
3-year returns: 13.71%
5-year returns: 10.21%
Expense ratio: 1.85%
SBI Flexicap Fund’s portfolio includes the likes of Cipla, HDFC Bank, Sheela Foam, and even Google! To make things easier, we’ve compiled the top 5 stocks held by SBI Flexicap Fund.
Top 5 Holdings
State Bank of India
2. HDFC Flexi Cap Fund
This top flexi-cap fund is older than Google! It was launched in 1995 and currently manages a portfolio worth ₹27,770 crores. It has generated 13.62% returns over the past 3 years and 10.40% in the past 5 years.
Fund name: HDFC Flexi Cap Fund
AUM: ₹27,770 crores
3-year returns: 13.62%
5-year returns: 10.40%
Expense ratio: 1.71%
HDFC Flexi Cap Fund’s portfolio includes SBI, National Thermal Power Corporation, ITC, and more. Here are the top 5 stocks held by HDFC Flexi Cap Fund.
Top 5 Holdings
State Bank of India
National Thermal Power Corporation
Reasons To Invest In Flexi-Cap Funds?
1. Lucrative Returns
A flexi-cap fund’s liberal investment philosophy allows it to leverage the growth of small-caps and mid-caps to generate potentially high returns. At the same time, it can use large-caps to add a layer of stability.
Generally, flexi-cap funds are known to generate 12-16% returns in 5+ years. There may be fluctuations in the short term because of the volatile nature of the stocks and the market.
Most mutual funds are diverse assets but are limited to the market cap they invest in. Flexi-cap funds do not have this limitation and can go one step further to invest across market caps.
Think of it as going to the bakery and buying sweets, savouries, and coffee while the rest of the mutual funds are limited to one of the three. Want a no nonsense guide to diversification? Click here.
The term flexibility has appeared multiple times and rightly so - it is one of the factors that make flexi-cap funds stand out in the world of mutual funds. The multi-cap philosophy allows flexi-cap funds to:
Access shares of companies of different sizes
Diversify within and across market caps
Rebalance across caps based on market conditions
Risks Involved In Flexi-Cap Mutual Fund Investments
Flexi-cap funds invest in stocks that are known for short term volatility. Furthermore, stocks are prone to price swings due to various factors like trends, macroeconomic conditions, and more.
That’s why you as an investor must understand if flexi-cap funds are right for you. An easy way to do this is by taking a risk quiz that’s available on apps like Cube.
2. Improper Stock Picking
Flexi-cap funds have the freedom to invest across caps. But not all flexi-cap funds, like any mutual fund, are made equal. Some are good, some are bad, while the rest are average.
This may lead to a possibility where the fund management team invests in the wrong stocks or relies too much on the wrong caps. That’s why it’s best to rely on flexi-cap funds handpicked by experts.
Watch this video to know if you should pick mutual funds on your own.
3. Over Diversification
A flexi-cap fund gives you access to multiple stocks. There may be a situation where you end up buying multiple flexi-cap funds with overlapping portfolios. This can lead to high fees.
Flexi-cap funds are equity funds and are treated as such during taxation. If you sell a flexi-cap fund after 1 year, you’ll have to pay a Short Term Capital Gains (STCG) tax. STCG is taxed at a flat 15%.
If you hold the flexi-cap fund for more than 1 year, you’ll have to pay a Long Term Capital Gains (LTCG) tax. LTCG is taxed at a flat rate of 10%. Gains of up to ₹1 lakh are free from LTCG tax.
Note: Facts & figures are true as of 05-06-2022. None of the information shared here is to be construed as investment advice. Exercise caution when investing in assets like stocks, mutual funds, alternative investments, and others.
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