'Active' flexi-caps vs 'Lazy' flexi-caps: Which is better?

Summary: Everyone has a theory about flexi-cap funds. “Active is better”, “lazy is safer”, “turnover tells the truth”… but what does the data actually say? And more importantly, is a fund’s turnover ratio a meaningful metric to judge before you invest? Let’s find out. Flexi-cap funds have become the comfort food of Indian investors. Most investors have one, and for good reason. At Value Research, too, we recommend a flexi-cap fund as the core of your investment portfolio. Historically, too, flexi-cap funds have done well. An average flexi-cap fund has posted a 17.7 per cent annualised return in the last five years and 14 per cent in the last 10 years. No wonder this category is the biggest beast in the mutual fund jungle, managing over Rs 5.3 lakh crore, as of October 31, 2025. But here’s the real question: Is there a pattern one can check to pick a solid flexi-cap, one that can do better than others? Recently, a YouTuber labelled a well-known flexi-cap fund as ‘bad’ simply because it had a high turnover ratio. This got me thinking: “Does a higher turnover ratio really mean a fund is bad? Does being ‘active’ help? Or do ‘lazy’, low-churn funds win?” To answer this, I took a quick dive into data. (Wait for the conclusion because that would be the most important takeaway.) But first, what on earth is a turnover ratio? The turnover ratio tells you how much of a fund’s portfolio changed in a year. For instance, a turnover of 100 per cent means a fund’s entire portfolio has changed within 12 months, a full clean-out. Broadly: Higher turnover means more buying and selling of stocks. Lower turnover means fewer changes and a more buy-and-hold investment strategy. Now that we understand what a turnover ratio is, let’s understand whether a high turnover flexi-cap fund performs better or not. To answer this, we analysed all flexi-cap funds with at least 10 years of history and examined their monthly turnover ratios since June 2017, a few months after the Associat