Multi Cap Mutual Funds

A multi-cap mutual fund is an equity scheme that invests at least 75% of its total assets in equity or equity-oriented instruments with a minimum allocation of 25% each to large-cap, mid-cap, and small-cap companies.

As this fund is sensitive to market movements, it carries a very high risk and its returns are also subject to market risks. Hence, investors who want diversified exposure across company sizes and tolerate market fluctuation in the long term can choose to invest in multi-cap funds.

A multi-cap mutual fund pools money from different investors and invests that amount across large-, mid- and small-cap companies in the following ratio:   

• A minimum of 25% in large cap companies for stability. 
• A minimum of 25% in mid cap companies for growth.  
• A minimum of 25% in small cap companies for potential higher returns.
• The fund managers can invest the remaining 25% as per the market outlook for better returns.   
  

The fund manager regularly monitors and rebalances the portfolio to maintain the required allocation and manage market opportunities. Your returns depend on the performance of the underlying stocks, after deducting applicable expenses. It is ideal for long-term investment. 

Investors can invest in multi-cap mutual fund through Paisabazaar app by following the simple steps below: 

1. Open the Paisabazaar app
2. Click on ‘Mutual Funds' on your mobile homescreen. 
3. Explore mutual funds by clicking on ‘View All’. 
4. Find multi-cap mutual funds under ‘Categories’ 
5. Select ‘Multi-Cap mutual fund based on your risk-appetite and investment horizon. 
6. Start your SIP or One-time investment.

Multi-cap mutual funds are taxed as equity funds. They are subject to capital gain (the profit earned from selling the unit). If you sold your units within 1 year, it is considered as Short-Term Capital Gains (STCG) and taxed at 20%. 

On the other hand, if you hold your units for more than one year and then sell, the gains are considered as Long-Term Capital Gain (LTCG). The gain of Rs 1.25 lakh per financial year is tax-free. So any gains exceeding Rs 1.25 lakh are taxed at 12.5%.   

If you choose the IDCW (Income Distribution cum Capital Withdrawal) option, the payout is taxed as per your income tax slab. Additionally, 10% TDS is deducted if the total IDCW payout from a fund house exceeds Rs. 10,000 in a financial year. 

Although both invest across large, mid and small-cap stocks, the key difference lies in how the portfolio is allocated.