A multicap mutual fund is a fund that invests across largecap, midcap and smallcap stocks. Multicap mutual fund schemes are recommended to equity investors with moderate risk appetite.
What are Multi-cap Mutual Funds?
The schemes involving investments across different market capitalizations and sectors, thereby offering the flexibility of switching to sectors and stocks to the fund managers. However, this shift is based on the market conditions and prospects of the sectors. Multicap mutual fund schemes may also invest in mid or smallcap stocks apart from large cap; this exposure offers chances of higher returns.
Here is a List of top 5 Multicap Funds you can invest in 2020:
|Fund’s Name||1 Year Return||3 Year Return||5 Year Return|
|Franklin India Focused Equity Fund||10.29%||11.82%||9.54%|
|Kotak Standard Multicap Fund||13.81%||14.82%||12.38%|
|Axis Focused 25 Fund||17.52%||19.58%||14.36%|
|Nippon India Focused Equity Fund||7.04%||9.81%||9.20%|
|SBI Focused Equity Fund||17.50%||17.60%||12.62%|
(Source: Value Research; Data as on January 08, 2020)
Who Should Invest in Multi Cap Funds?
- Investors with investment horizon of 3-5 years or more
- Investors with the financial objective of wealth creation should try investing in multi cap funds
- Investors looking for diverse portfolio as multi cap funds invest in companies of multiple sizes across market
- Investors wanting high returns as well as some risk minimization and stability in equity funds.Medium and small sized companies will grow and rates will increase in bullish market while large cap stocks will provide stability, even in a bear market
Advantages of Multi Cap Funds
Diversity – Multi cap funds invest strategically in firms of all capitalizations in the market, so as to create a balance and generate more returns. It provides investors with a diverse portfolio where their money is invested in stocks of multiples sizes, capitalizations and sectors
Flexibility – Instead of switching from one capitalization to another, fund managers have the flexibility where s/he can easily shift and switch funds from holdings to another between large, mid and small cap
Stability – A fund that invests in multi cap stocks is with a purpose to attract returns from all while having the stability of large cap. Large cap stocks’ rates don’t fall easily even in bullish market, while reducing the risks if small and mid cap stocks underperform. In a bear market, even mid and small cap firms may rise in their value prices, thereby giving benefits to the investor. Going by SIP route is always beneficial, as it provides rupee averaging cost benefit
Things to Consider before Investing in Multi Cap Funds
Every investor needs to research certain things before investing like risks involved, fund performance, suitable for his/her financial goals. Below are some of the things which must be considered by an investor before investing:
Financial Goal – It is important for an investor to invest in fund scheme suiting his financial goals. Multi cap funds are suitable for investors who would like to invest for long term and also want a diverse portfolio.
Fund Performance – Among a plethora of fund plans available, one must research on history of performance and returns by the scheme before making any investment. Measuring the performance of the fund in both bullish and bearish market situations is a necessity as it helps the investors in selecting a reliable fund. One should always choose a fund which has been performing with consistency
Fund House & Management – There are numerous Mutual Funds regulated by different AMCs (Asset Management Companies). Fund houses & Fund Managers play a very decisive role in the allocation of assets and selection of stocks. If the management has enough experience and expertise, the fund will easily sail through promising market conditions and deliver good returns
Risks involved in Multi Cap Funds
There are no guaranteed results as market risks are always associated with equities. Some small and mid cap stocks may not perform as expected and even large cap stocks may underperform in a bull market. Also, if you want to redeem the fund in less than 5 years, then multi cap funds are not for you as it cannot generate high returns in the short term. It is suitable for long term as then this fund can beat inflation rate and give high returns.
How to invest in Multi Cap Funds?
- Sign Up/Sign In to Paisabazaar.com and go to ‘Direct Mutual Funds’
- Click on the section of ‘Mutli Cap Funds’
- Select the fund in which you want to invest and look at the details. You can also compare similar schemes as well as use SIP Calculator or Lumpsum Calculator to estimate the future value of your investment
- Click on ‘Invest Now’, select either Lump sum or SIP
Why should you choose Paisabazaar?
- Trusted website, no commission charges and no paperwork
- You can compare more than 1,700 Funds at one platform instead of visiting the website of each AMC and then searching for numerous funds
- Easy to browse as Funds are segregated under Equity, Debt, Large Cap, ELSS, etc. You can further add filters of ratings, returns, fund houses
- Important scheme details such as latest Net Asset Value (NAV), expense ratio, assets under management, etc are also available on the portal, making it easier for consumers to pick a suitable fund
Frequently Asked Questions (FAQs)
Q. What is Net Asset Value (NAV) of a scheme?
A. Net Asset Value (NAV) is the value of a mutual fund scheme’s assets that is is the price at which you buy or sell the unit of a scheme (minus any load if applicable). To calculate the NAV of a mutual fund, divide the total net assets by the total number of units issued. Also, you need to subtract any liabilities from the current value of the mutual fund’s assets and then divide the figure by the total number of units outstanding.
Q. What is an Exit Load?
A. Exit load is the cost that an investor needs to bear if he or she sells the mutual fund units before a predefined time frame. Generally, equity mutual fund schemes levy an exit load of 1% if the units are sold within one year of buying. It is basically a mechanism to prevent investors from premature withdrawals.
Q. What is Expense Ratio?
A. Expense Ratio of a mutual fund is the total percentage of fund assets charged from investors for investing, selling & purchasing of stocks and management by the fund management companies. For instance, an expense ratio of 1% per annum means that each year 1% of the fund’s total assets will be used to cover expenses and an investor receives the returns from the scheme minus the amount of expense ratio.
Q. What is a Systematic Investment Plan (SIP)?
A. Systematic Investment Plan (SIP) allows investors to invest via installments instead of single down payment of amount in a mutual fund scheme. An investor can invest periodically in a fund through monthly payments of small amounts over a period of time than investing a lump sum.
Q. How is SIP Return Calculated with Example?
A. You need 3 things to calculate SIP Returns –
1) Investment Per Month
2) Investment Duration/Tenure and Expected Rate of Returns. You can calculate SIP Returns manually on Excel Sheet using XIRR function which can be a little confusing. It is best to use SIP Calculator and get an estimate of SIP Returns.
For an Example:
If you have invested Rs. 1,000 per month for a tenure of 2 years and expected rate of return is 10%, then your invested amount is Rs. 24,000 while the amount you get will be Rs. 26,446.