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Flexi cap vs multi cap: Which is better for you?

Let's learn what separates a flexi-cap fund from a multi-cap fund and if one is better than the other

Multi cap vs flexi cap | Difference between flexicap and multicap

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If you invest in equity funds, then you must be familiar with the flexi-cap and multi-cap categories of funds. Naturally, you might wonder which is better and whether you should invest in them or not. Let's understand them both in detail.

Initially, multi-cap funds simply had to invest 65 per cent of their assets in equities. Following the changes made to the scheme characteristics by SEBI in September 2020, the multi-cap funds in their current form came into existence w.e.f. January 2021.

In November 2020, SEBI introduced a new category - the flexi-cap funds.

Which is suitable for you?
Both categories of funds in their current form have existed since 1st January 2021, which is too short of a period to determine which performs better. Moreover, both have different allocations across large-, mid- and small-cap stocks.

However, both flexi-cap and multi-cap funds aim to provide growth in the long term. But, the choice of fund entirely depends on your risk tolerance and investment horizon. Go with a multi-cap fund if you can handle the volatility that comes with 50 per cent allocation to mid- and small-cap stocks. Else you can opt for a flexi cap fund which, on average, has only 25-30 per cent allocation to mid- and small-cap stocks.

You can also check out the funds handpicked by our analysts. These have the capacity to fulfil any possible investing requirement.

Suggested watch: Flexi-cap vs multi-cap mutual funds


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