Multicaps vs Flexicaps: Differences

Quick Links: Website | Play Store | App Store | Instagram | LinkedIn

Mutual Funds have gained significant popularity in India in recent years, and for good reasons. They are favored by many investors due to the attractive returns they offer, helping to recover from inflation over time while assisting in achieving long-term wealth-generation goals.

Since Mutual Funds have become a key component of investment portfolios, it’s essential to understand how to invest in them effectively to make informed decisions and create desired portfolios.

Focus on Equity Mutual Funds

When discussing long-term investments or ways to beat inflation, equity mutual funds are the first category that comes to mind. Within the equity mutual fund category, there are various sub-categories, including Multi-Cap Funds and Flexi-Cap Funds.

Definitions

Multi-Cap Fund:

As the name suggests, Multi-Cap Funds invest their corpus in a diversified portfolio of equity and equity-related stocks of companies with varying market capitalizations. This includes investments in large-cap, mid-cap, and small-cap companies. Multi-Cap Funds are a good choice for those looking to match their risk tolerance, as different schemes invest in various percentages across market caps.

Flexi-Cap Fund:

According to SEBI’s notification, a Flexi-Cap Fund is an open-ended, dynamic equity scheme that invests in companies of any market capitalization—large, mid-size, or small-cap. At least 65% of the scheme’s total assets must be invested in equity and equity-related instruments.

Key Differences Between Multi-Cap Funds & Flexi-Cap Funds

Particulars	Multi-Cap Funds	Flexi-Cap Funds
Meaning	Invests in a diversified portfolio of large, mid-cap, and small-cap corporations.	A dynamic equity program that invests in businesses of any market capitalization.
Equity Exposure	Requires a minimum of 75% in equities.	Requires a minimum of 65% in equities.
Market Cap Allocation	Must allocate at least 25% to large, mid-cap, and small-cap companies.	No specific market cap allocation; can invest freely.
Fund Manager Discretion	Fund manager can select stocks and market capitalization.	Fund manager can select stocks within the specified market caps.
Risks	Riskier than large-cap funds, as it includes mid-cap and small-cap stocks.	Offers flexibility in managing market volatility with a diversified portfolio.
Tax Implications	Short-term capital gains (STCG) taxed at 15% for investments held for less than a year; long-term gains (LTCG) above ₹1 lakh taxed at 10%.	STCG taxed at 15%; LTCG exempt up to ₹1 lakh, with amounts above that taxed at 10%.
Who Should Invest?	Suitable for risk-tolerant investors seeking higher returns with a longer investment horizon (5-7 years).	Ideal for those looking for a balanced fund with tactical allocations to mid and small caps within a 5-year timeframe.
Benefits	Diverse investment opportunities and potentially lower long-term risk.	Flexibility in market exposure, ease of portfolio balancing, and lower risk for small investors.

Conclusion

This blog highlighted the key distinctions between Flexi-Cap and Multi-Cap Funds. Both types of funds offer portfolio diversification and can be beneficial, depending on individual financial objectives, risk tolerance, and investment horizon.

Happy Investing!

Disclaimer: This blog is for educational purposes only. The securities/investments mentioned here are not recommendations.

P.S. If mutual funds are on your mind, check out Miles Wealth! We make investing easy with personalised mutual funds tailored to your risk tolerance and financial goals. No need to be a finance expert or spend hours researching—just invest in funds that truly fit you. Download Miles Wealth today!

Quick Links: Website | Play Store | App Store | Instagram | LinkedIn

Give it a shot (it’s free) and let us know what you think! Your feedback is super helpful and helps us improve.