Multicap Funds - The Ideal Choice?

March 3rd, 2022 Mutual Funds

Multicap Funds are diversified equity funds which invest in stocks across market capitalization.  A Multicap Fund’s goal is to offer capital growth and reduce the risk by diversification through tactical asset allocation.

SEBI defines a multi-cap fund as one with a minimum 25% allocation to large caps, 25% to mid-caps, and 25% to small caps.

The biggest advantage Multicap Funds give are diversification across market capitalization. Fund managers select those sectors which are not the part of the “Benchmark Indices” Sensex and Nifty. These indices are Large Cap indices and are most of its exposure towards Banking and Technology. Whereas, the broader market indices provide exposure towards Commodities, Renewable Energy and other such sectors which have potential to grow faster as compared to the frontline large cap names.

Multicap Funds have been among the best performing Mutual Fund categories in the last 1 Year as they have beaten the Benchmark by a mile and have generated handsome returns to the investors.

The balanced portfolio of having quality mid and small cap stocks in the portfolio enables the Multicap Fund to beat the market and stay ahead of the line. Mid Cap and Small Cap stocks have higher potential of faster growth because of their earnings growth and continued profitability.

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