Impact Feature: Multi-Cap Funds – A Comprehensive Solution for Every Investor
With the plethora of available options, investing in equity can often overwhelm both new and experienced investors. One fund category that can help simplify the decision-making process for anxious, confused, or overly ambitious equity investors is multicap funds. In today’s world, where making smart investment choices is critical, multicap funds offer a simple yet powerful way to potentially grow your money. Let’s take a closer look at what multicap funds are and how they can become an integral part of your portfolio.
Understanding Multicap Funds
Multicap funds, regulated by the Securities and Exchange Board of India (SEBI), are defined by their investment mandate to allocate at least 75%(1) of their investments with a minimum of 25% in large, mid, and small-cap stocks.
These funds are like a basket that mixes different types of shares from various market capitalizations. Imagine being at a fruit market and, instead of buying just apples (large-cap stocks), bananas (mid-cap stocks), or grapes (small-cap stocks), you decide to go for a basket containing all three. Multicap funds do just that – they allow you to invest in all three market caps with a single fund.
Suitable for Every Investor
The beauty of multicap funds lies in their inclusivity – they are for everyone invested in the world of equity! For the anxious investor, multicap funds offer a broad solution for those worried about missing out on market opportunities, as they invest across all market capitalization segments. For the confused investor, multicap funds help clear uncertainties by offering a well-diversified portfolio through strategic investment allocation across different market caps. And if you’re ready to take on more risk for faster growth, small-cap companies in the mix can offer potential growth opportunities. By diversifying investments across market segments, these funds cater to various risk appetites.
Adapting to Market Dynamics
One of the major advantages of multicap funds is their exposure to all market caps. The structure of these funds allows investors to navigate dynamic market conditions with resilience. During certain market cycles, mid and small-cap stocks may outperform. Conversely, during downturns, allocation towards large-cap stocks can provide potential stability to the portfolio. This ensures that investors can weather market volatility while optimizing potential returns for the long term.
Participating in India’s Growth Story
India’s rapidly progressing economy, supported by strong GDP growth and a thriving business landscape, presents ample growth opportunities across the market spectrum. Having surpassed the significant milestone of $5 trillion in equity market capitalization, India offers immense opportunities for growth across companies of all sizes. Strategic investments in key sectors like infrastructure, manufacturing, and technology highlight an active approach to promoting sustainable progress.
This favorable market environment not only increases the appeal of multicap funds for investors but also reflects India’s commitment to fostering long-term growth.
Multicap funds provide a convenient entry point into a market where small-cap companies can mature into mid-cap contenders and eventually grow into large-cap companies, allowing investors to effectively capitalize on this upward journey.
Core Multicap Fund Offers Diversity
- Diversification Across Market Segments
Multicap funds provide diversification not only across market capitalization but also across all sectors. Large-cap stocks are of well-established companies with substantial market capitalizations, mid-cap stocks represent companies in growth and expansion phases, and small-cap stocks typically include emerging companies with high growth potential.
By spreading investments across companies of different sizes, multicap funds reduce risks associated with any one market segment. This diversification also ensures that investors are not overly exposed to the performance of a particular segment, enhancing portfolio stability. India’s economy is diverse, encompassing sectors like IT, healthcare, finance, consumer goods, and manufacturing. Each sector responds differently to economic cycles and market conditions.
Multicap funds allocate investments across various sectors, reducing sector-specific risks. This sectoral diversification ensures that investors’ portfolios are not overly reliant on the performance of a single industry, increasing resilience.
The Goal of Multicap Funds: Balanced Risk-Adjusted Returns
The aim of multicap funds is to balance risk and reward. By investing in large, mid, and small-cap companies, they offer diversification that can help reduce risk compared to funds focused on a single market segment. This diversification allows them to capture potential growth opportunities across the market capitalization spectrum. As a result, multicap funds have the potential to offer relatively better risk-adjusted returns, meaning they provide a good balance between potential growth and risk exposure.
In summary, multicap funds are like all-in-one packages for investors. They offer you a mix of stocks that can potentially grow your money over time while also cushioning it during rough patches in the market. So, if you’re looking for a hassle-free way to make a thoughtful investment and access all three market caps with a single fund, multicap funds may be the right fit for your portfolio!
- https://www.amfiindia.com/investor-corner/knowledge-center/SEBI-categorization-of-mutual-fund-schemes.html
- https://www.moneycontrol.com/news/business/earnings/mcap-of-bse-listed-companies-hits-5-trillion-first-time-12727894.html
Source: Axis MF Research, AMFI, MFIE Data as of 31 August, 2024.
This is an investor education and awareness initiative by Axis Mutual Fund.
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Market caps are defined according to SEBI’s rules as follows: a. Large Cap: 1st-100th company in terms of full market capitalization. b. Mid Cap: 101st-250th company in terms of full market capitalization. c. Small Cap: 251st company in terms of full market capitalization.
The mentioned sectors are general in nature and should not be construed as recommendations.
Statutory Details: Axis Mutual Fund has been established as a trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Limited (liability limited to ₹1 lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (AMC). Risk Factors: Axis Bank Limited is not liable for any loss or shortfall resulting from the management of the scheme.
Mutual fund investments are subject to market risks, read all scheme-related documents carefully.
