Mutual funds: Why are flexi-cap funds appropriate for all seasons?

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Investing in equity funds requires investors to understand which categories can best suit their financial goals. Large-cap, mid-cap, and small-cap funds all offer their own advantages, but many investors are now turning to flexi-cap funds as an effective way of diversifying their portfolios.

Mutual funds

Flexi-cap funds are a type of equity mutual fund that invest in equity and equity-related instruments across all market capitalisations and sectors/themes. This means that they are not restricted to a single segment and are able to take advantage of opportunities regardless of market size or sector. But what makes this type of fund appropriate for all seasons? Let’s find out.

Low risk, high returns

Flexi-cap funds offer investors the opportunity to make investments with relatively low risk while still obtaining higher returns than other types of investments. These types of mutual funds invest at least 65% of total assets into equities and equity-related securities. This strategic approach allows flexi-cap funds to achieve above-average returns due to being well-positioned to generate better risk-adjusted returns than other investment options.

Reduced volatility

Flexi-cap funds also reduce volatility by allowing investors to take advantage of various investment strategies in different markets. For example, in times when stocks are underperforming, flexi-cap funds can invest in debt instruments such as bonds or fixed-income securities which may provide risk mitigation during these uncertain times. In addition, these flexible funds can also take advantage of opportunities presented by certain sectors or capitalisations that may be outperforming due to current events or trends in the market.

Option to exit from unattractive funds

A flexi-cap fund gives the fund manager the flexibility to make tactical and timely switches between various market segments. This allows them to reduce the risk of being exposed to a particular segment that has become unprofitable due to unfavourable economic or market conditions. By moving into other alternate market segments, fund managers can provide investors with reduced risk exposure and significant return potentials. The flexibility to exit volatile companies also helps maintain optimal investment performance with minimal downside risk for investors.

Portfolio stability

Flexi-cap funds provide investors with portfolio stability by enabling them to diversify their portfolios across the market capitalisation spectrum. This is in contrast to funds that only focus on specific cap size such as large-cap or mid-cap or small-cap,which could potentially leave investors vulnerable if one sector experiences volatility.

Ways to invest in flexi-cap funds

Downloading and launching a mutual fund investment app is the easiest way to get started with investing in flexi-cap funds. After downloading the app, investors have to register themselves using basic details such as name, PAN, bank account details, etc. After successful registration, they can start investment in mutual funds through these apps.

  1. Open the app
  2. Login with login credentials
  3. Go to the equity section
  4. Click on the option ‘flexi-cap’
  5. Check and compare mutual funds available in the list. After selecting the fund, click on ‘invest’
  6. Now choose the method ‘lump-sum’ or Systematic Investment Plan (SIP)
  7. Enter the amount to invest
  8. Provide bank details and complete the payment process to buy the funds

Closing notes

Flexi-cap funds have the ability to adapt to changing market conditions while offering diversification benefits, potentially better returns, and an option for exit from underperforming investments when needed. They may be suitable for all seasons due to their flexibility of taking advantage of different economic cycles without having too much exposure toward any single market cap or investment for the long term. So, investors looking for an appropriate way to invest during all seasons may consider adding flexi-cap funds into their portfolio mix.

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