What is Multi Cap Mutual Fund and Its Types?
One makes investments to gradually increase their wealth. Investments have the potential to produce higher returns than traditional savings products like savings accounts or CDs, investments in assets like stocks, bonds, mutual funds, and real estate can be used to achieve this goal. Let’s understand what is multi cap fund. Stocks of companies with a variety of market capitalizations are purchased and sold by "multi-cap" mutual fund investors.
The cap sizes of these companies could be small, midsize, or large. Due to the degree of diversification, they provide, multi-cap funds might be a safer investment choice. By buying shares of companies across a range of sizes and industries, a multi-cap fund can reduce risk. In addition to creating a more balanced investment, this can lower the portfolio's overall risk. Because they give the fund manager the flexibility to change holdings in response to shifting market conditions and seize opportunities as they arise, multi-cap funds are regarded as a flexible form of investing. Returns could rise while risk is reduced. Now that you know what is multi cap mutual funds, let’s dig deeper into why you should really invest there.
Why Should You Put Money Into Multi-Cap Funds?
There are many reasons why someone might choose to invest in multi-cap funds, including the following.
- Risk is spread out and a portfolio's distribution is made more even thanks to multi-cap funds' exposure to a wide range of companies of various sizes and industries.
- Professional management: Qualified fund managers who have the resources and expertise to carefully select and manage the fund's investments run multi-cap funds.
- Flexibility: Multi-cap funds have the ability to adjust their portfolios in response to shifting market conditions and seize opportunities as they arise. This leads to the benefits like lower risk and higher returns.
- Multi-cap funds are more accessible to a wider range of investors because they have lower investment minimums than other investment types.
- Investors have the freedom to enter and exit the market as necessary because multi-cap funds are simple to buy and sell.
- Investment objectives must match: Multi-cap funds can accommodate a range of risk profiles and investment objectives, including growth, income, and balanced investments.
It's important to keep in mind that investing in funds, including multi-cap funds, carries some risk and that past success does not guarantee future success. As a result, prior to making any investment decisions, it is essential to conduct extensive research, seek advice from a financial advisor, and be aware of your own investment objectives and risk tolerance.
Types of Multi-Cap Funds
Multi-cap funds come in a wide range of formats, such as:
- Aggressive Multi-Cap Funds: These funds invest a larger portion of their assets in small- and mid-cap companies, which have a tendency to exhibit both higher growth potential and higher volatility.
- To provide a balance of growth and stability, moderate multi-cap funds evenly distribute their assets among small-, mid-, and large-cap companies.
- Large-cap companies, which are typically more established and stable but have less room for expansion, represent a larger portion of the assets invested in conservative multi-cap funds.
- Multi-Cap Value Funds: These funds invest in undervalued companies with the potential for future growth.
- Multi-Cap Growth Funds: These funds invest in companies with higher growth potential.
- Multi-Cap Income Funds: These funds invest in companies that have a high dividend yield and are expected to provide investors with steady returns.
Which Possible Dangers Exist?
Multi-cap funds do not have zero risk, in contrast to other investment types. The following are potential dangers associated with multi-cap funds:
- Market risk: When the overall market or a specific industry change, investments' values could also change.
- An issuer who purchases bonds or other debt securities runs the risk of not being able to make payments.
- When investing in bonds, there is a risk known as interest rate volatility that could lower or raise the value of the bonds.
- Risk of inflation: Investing in assets that don't yield returns that increase over time at the same rate as inflation can result in a decline in purchasing power.
- Liquidity risk: It might be challenging to quickly convert some investments into cash in an emergency.
- Political and economic risk: The political and economic stability of the countries or regions where investments are based may have an impact on those investments' values.
- The expertise of the fund manager will also have an impact on the performance of a multi-cap fund. An underwhelming fund manager may be to blame for lower returns.
- Under/Over Diversification Risk: Under/over diversification risk may result in higher volatility and/or lower returns.
Some Good Performing Multi Cap Fund
Here is glimpse on top 5 multi cap fund.
Tata Equity PE Fund
| Equity | 40.17 | 18.47 | 22.86 | 16.55 |
| 1Y | 3Y | 5Y | 7Y |
DSP BlackRock Opportunities Fund
| Equity | 38.75 | 18.22 | 20.37 | 14.53 |
| 1Y | 3Y | 5Y | 7Y |
Quant Active Fund
| Equity | 7.2% | 36.3% | 21.1% |
| 1Y | 3Y | 5Y |
Kotak India Growth Fund
| Equity | 1.3% | 28.9% | - |
| 1Y | 3Y | 5Y |
SBI Magnum Multicap Fund
| Equity | 36.50 | 17.11 | 21.00 |
| 1Y | 3Y | 5Y |
Things To Consider
Before making a choice, be sure to understand your investment objectives and risk tolerance.
- Conduct in-depth research: Examine the portfolio's makeup, past performance of the fund, and track record of the fund manager.
- Consider the fund's expense ratio, which is the annual fee it levies to cover its costs. More of your money is invested and you'll receive higher returns if your expense ratio is lower.
- A fund that has consistently produced returns over a long period of time is a better investment option than one that has only produced high returns recently.
- Keep an eye on the asset allocation of the fund; it's critical to confirm that it matches your own investment objectives and risk appetite.
- Continue to keep an eye on the performance of the fund, and if it falls short of your expectations, reconsider your investment choice.
- Portfolio diversification can help to lower risk and boost returns by spreading your holdings among various asset classes and industry sectors.
It's critical to remember that investing in funds of any kind, including multi-cap funds, entails some risk. Before making any investment decisions, it is always advised to speak with a financial advisor.