Multi Cap Fund
Equity markets are witnessing interesting times. While the trajectory of GDP growth looks promising, factors like lower crude prices, steady GST collections, slew of reforms, strong domestic demand along with positive macro-economic factors have set the stage right for a decade of growth in the Indian economy. All these factors coupled will have a have a positive impact on the equity markets.
One of the smartest ways to benefit from this potential growth of the Indian equity market is investing in a diversified portfolio which invest across a range of market cap may be a solution to build wealth. Multi Cap schemes can be a good choice for a core portfolio of investors looking to invest in equities and participate in broad-based growth.
Salient Features of Multi Cap Fund
Performance & Diversification: Multi Cap positioning may help with performance consistency with the constant combination of Large, Mid and Small Caps
Large-caps are represented by the top 100 stocks on full market capitalisation basis & Mid caps are represented by the next 150 stocks based on full market capitalisation and Small Cap stocks beyond 250th stock based on full market capitalisation basis, as per the list issued by AMFI.
Suitable for any Market Cycles: Multi-cap funds can be all-weather funds as the diversity of market cap allocations helps the fund throughout various market cap cycles
Earnings Growth Combo: Multi Cap investments may offer combination of steady and consistent earnings growth with flavor of accelerated earnings growth
Beat Volatility: Multi Caps show relatively moderate volatility due to allocation to Large Caps and aim for better risk adjusted performance
Well-Researched & Under-Researched: Well researched Large Caps have visibility on earnings growth while mid & small Caps may subject to the market mis-appraisal and mis-pricing as they are under researched stocks
Discounted Valuations: Mid Caps and Small Caps may offer valuation discount on account of under-research characteristics
Economies of Scale and Alpha: While Large Caps may achieve robust economies of scale and stable performance, Mid & Small Caps may offer relatively higher growth / performance
Better Risk-Adjusted Returns: Risk is regulated by reducing allocation to riskier segments of the market and minimizing its impact by increasing allocation to companies that are poised to deliver because they can invest across all market caps
Investors who want very few funds in their portfolios, and are keen on a constant exposure to mid- and small-cap stocks may opt for multi-cap funds. Such investors must have a high risk appetite and should be able to tolerate the higher volatility in these funds (compared to categories like large-cap, large and midcap, and flexi-cap funds). They must have an investment horizon of seven years or more to invest in these funds.
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