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Multi-cap funds vs. flexible-cap funds: where to invest and why? , Multi Cap Fund Vs Flexi Cap Fund: More Benefits If You Are Investing Long Term Through SIP Know Which Fund Is Better IG News


New Delhi5 days ago

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If you are planning to invest in mutual funds in the new year, multi-cap and flexi-cap can be good choices. According to the official website of the Association of Mutual Funds in India (AMFI), the multi-cap has given returns of up to 44.11% in the last one year. While flexi-cap has given returns of up to 43.13% in the last one year.

Both the predictions are due till January 4, 2024. If you invest through SIP for a long time, you can get good returns through both the funds. Now first tell us about the difference between these two mutual funds –

What are Multi Cap Fund and Flexi Cap Fund?
Multi-cap funds are diversified mutual funds. It is a “bundled” fund with small, mid and large caps. When investing in this category of funds, 25% of investors’ money is invested in small-cap companies, 25% in mid-cap companies and 25% in large-cap companies. While the fund manager can invest 25% of the money as he sees fit.

In doing so, you invest in companies of all sizes and sectors at the same time through a single fund. Whereas in flexi cap, fund managers invest investors’ money in their choice of small, mid or large caps. In this case, the fund manager is not obliged to invest how much in which fund category.

Is a multi-cap fund or a flex-cap fund better for me?
If you want to invest your money through a mutual fund by diversifying it into stocks of 25% large cap, 25% mid cap and 25% small cap companies, then you can choose a multi cap mutual fund option.

Although multi-cap funds do not have a long track record, these funds came into existence in September 2020 under the new SEBI rules. At the same time, if you trust the investment strategy of the mutual fund manager, then you can invest in flexi-cap funds.

More benefits by investing through SIP in long term
It often happens that investing in equity funds turns out to be more profitable in the long run. The reason for this is that the long-term implementation of SIP in equity funds reduces the risk of fluctuations in the stock market. Stock market lows and highs create average returns and also benefit from compounding.

Is SIP the best way to invest?
It might not be appropriate to call it the best way to invest, but it can definitely be a good way to invest for regular income people like employees and businessmen who have fixed income every month. Investing through SIP does not burden the pocket and by investing small amounts continuously, a good amount can accumulate in the long run.

What is a benchmark?
Benchmarks are usually Indian stock market indices such as BSE Sensex and Nifty against which mutual fund returns are compared.

Let’s understand this with an example…
If your mutual fund has given a return of 59% over a period. At the same time, its benchmark has given returns of 70% during this period, which shows that this fund has given lower returns compared to the benchmark. The higher the mutual fund’s return compared to the benchmark, the better its performance.

What are the other caps including small and medium?
According to the market capitalization, that is, the market value, all companies in the country are divided into 3 categories. Among these, companies whose market capitalization is Rs 20 thousand crore or more are called large cap. Their value is less than Rs 20 thousand crores but more than Rs 5 thousand crores, they are called mid cap companies.

While small cap companies are those companies whose value is less than Rs.5 thousand crores. Generally, the top 100 companies by market capitalization are large caps, 100-250 are midcaps, and all companies above that are small caps.

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