Multi Cap Mutual Funds

Multi Cap Fund offers balance and flexibility as these funds make investment in companies of different sizes large, mid and small within a single portfolio. This blend of different companies helps in risk diversification and provides an opportunity to capitalise on growth. Multi-cap schemes are perfect for investors looking for capital appreciation and open to bear market fluctuations. Multi-cap funds are managed by experienced fund managers who take their investment decisions according to the conditions prevailing in the markets.

What are Multi Cap Funds?

Multi cap funds are the type of equity-based mutual funds that invest in companies across capitalization. In other words, these types of equity funds do not have any focus on investing in either large corporations or small firms. Multi cap funds invest in large, mid and small cap stocks.

According to SEBI, multi cap funds are required to compulsorily invest a minimum of 25% each in large cap, medium cap, and small cap stocks, making them balanced and diversified in nature.

Features of Multi-Cap Funds

There are some distinct features of multi-cap funds that make them appealing to the investors:

• Portfolio Diversification: Multi-cap funds invest in large-cap, mid-cap, and small-cap stocks, thereby minimising any possible risk arising from underperformance in any single segment.
• Managed by Fund Managers: Professional fund managers carefully select stocks in accordance with their assessment of market trends and research.
• Flexibility in Selection of Stocks: Fund managers have the option to vary allocations among sectors or companies according to the market environment.
• Balanced Risk and Returns: Since multi-cap funds invest in different company segments, they are capable of delivering both stability and high returns.

How to Invest in Multi Cap Funds?

You can invest in multi 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 multi cap funds.

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 Multi Cap Funds?

Multi cap funds offer several benefits that make them an attractive option for investors seeking stability along with growth from their investments. Some of the reasons include:

• One fund, Multiple Opportunities: Your funds will be invested in large caps, mid caps, and even small caps, making investing simple and convenient.
• Higher Growth Opportunities: Smaller and medium-sized businesses have the potential to achieve fast growth and therefore yield higher returns in good market conditions.
• Minimal Risk Due to Diversification: The chances of capital loss are minimised since your investment will be diversified among many companies of different categories.
• Ideal for Long-Term financial Goals: Multi cap funds are best for different goals such as retirement savings, children's college fees, or building wealth over the long-term.

Taxation Rules for Multi Cap Funds

In India, multi cap funds are taxed similar to equity mutual funds, since they are also required to invest at least 65% in domestic equities or related derivatives.

• Short Term Capital Gains (STCG): If you sell your multi cap units within one year, the gains will be considered short-term capital gains (STCG). These will be taxed at a flat rate of 20% plus applicable surcharge and a 4% health and education cess. It is worth noting that there is no basic exemption limit available for short-term capital gains.
• Long Term Capital Gains (LTCG): The gains will be classified as LTCG if you have sold mutual funds units for more than 12 months. These will be taxed at a flat rate of 12.5% without indexation benefit.