Flexi Cap Mutual Funds

Over the years, flexi cap funds have emerged as one of the most popular categories of mutual funds in India. These funds allow fund managers to make investments across market capitalisations: large cap, mid cap and small cap. Over the years, flexi cap funds have attracted significant attention from various groups of investors due to their ability to navigate different market cycles effectively.

What are Flexi Cap Funds?

A flexi cap fund is an open ended equity mutual fund scheme that invests across large cap, mid cap and small cap stocks. As per the guidelines prescribed by the capital market regulator, the SEBI, flexi cap funds are required to invest at least 65% of assets under management (AUM) in equity and equity related instruments. The flexibility in flexi cap funds allows fund managers to capture growth opportunities depending on the market conditions.

Features of Flexi Cap Funds

• Dynamic Asset Allocation: Fund managers are allowed to shift investments between large cap, mid cap and small cap based on the market conditions.
• Professional Fund Management: The funds are managed by professional fund managers, who are monitoring market opportunities actively and execute arbitrage trades to generate returns.
• Long-Term Wealth Creation: Flexi Cap Funds invest a significant portion into equities, making them ideal for those looking to create wealth over the long run.
• Portfolio Diversification: As the portfolio is diversified among various market-cap and sectors, the investor gains more from diversification than the specific category fund.

How to Invest in Flexi Cap Funds?

You can invest in flexi cap funds by following simple process:

Step 1: Choose investment mode. You can invest through:

• AMC websites
• Online investment platforms provided by stockbrokers
• Mutual fund distributors

Step 2: Choose suitable flexi cap fund

Step 3: Choose between Systematic Investment Plan (SIP) and Lump sum based on your goal and make investment.

Step 4: Make payment through UPI, netbanking or other available methods.

Why Invest in Flexi Cap Funds?

• Exposure to Market Segments: Flexi cap fund gives investors an access to large, mid and small cap companies via one single investment vehicle
• Flexibility: Fund managers are allowed to shift fund allocations depending on the market opportunities.
• Convenience: While investing in multiple equity funds is tedious, flexi cap funds offer an easy way to obtain diversified equity exposure by only using one fund.
• Risk Management Opportunity: It will be easier for fund managers to balance across market capitalisations in order to mitigate risks.
• Appropriate for Long-Term Investors: Flexi Cap Funds are generally deemed appropriate for investors that have a long investment time period of around five years or more.

Taxation Rules for Flexi Cap Funds

Flexi Cap Funds fall into the category of equity-oriented mutual funds since their equity exposure is minimum 65%. Hence, flexi cap funds are subject to the laws for equity mutual fund taxation.

• Short-Term Capital Gains (STCG): If units are sold within 12 months from the date of purchase, the profits will be considered STCG, which shall be taxed at 20%, with applicable surcharge and cess.
• Long-Term Capital Gains (LTCG): Profits made from selling units after 12 months will be considered LTCG. Profits made on flexi cap funds beyond ₹1.25 lakh in a fiscal year will be taxed at 12.5%, whereas LTCG up to ₹1.25 lakh is tax-exempt.