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Summary: This piece weighs the merits of multi-cap funds against separately managing large-, mid-, and small-cap fund investments. It argues that for most regular investors, multi-cap funds offer the right balance of diversification and simplicity, without requiring active rebalancing.
Is it better to invest in multi-cap funds or separately in large-, mid- and small-cap funds?
Multi-cap funds are mutual funds that invest across the market, with at least 25 per cent of their assets in large, mid and small caps. This gives investors broad market exposure through a single fund.
If you are able to spot a wise fund manager, it is good to invest in a multi-cap fund. Markets are cyclical between their components; sometimes large caps do well, sometimes mid caps and sometimes small caps. When markets correct, small caps tend to crumble and mid caps struggle, while large caps prove more resilient. A multi-cap fund gives you exposure to companies of different sizes, keeping your portfolio reasonably diversified without added complexity.
That said, multi-cap funds are not for everyone. Aggressive investors who are comfortable with higher risk can allocate a portion of their portfolio to dedicated small- and mid-cap funds, provided they are prepared for sharp swings in value and can stay invested through the lean periods. For everyone else, a well-managed multi-cap fund offers the simplest path to broad market exposure without the burden of constant rebalancing.
To know which multi-cap funds are best suited for your financial needs, consider subscribing to Value Research Fund Advisor. Learn more about our analyst-backed fund recommendations, performance insights and portfolios tailored to your requirements.
This article was originally published on July 25, 2018, and last updated on May 27, 2026.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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