Welcome to the world of equity investing, where the options can be overwhelming and the terminology confusing. If you're considering investing in mutual funds, you may have come across two types of equity funds: multicap and flexicap. Both have their pros and cons, and it can be difficult to determine which one is right for you. In this blog, we'll dive into the similarities and differences between multicap and flexicap funds and help you make an informed decision based on your investment goals and risk tolerance. Whether you're a seasoned investor or just starting out, this guide will give you a clear understanding of these two popular types of equity funds
Differences between Multicap and Flexicap Funds in India:
Investment strategy: Multicap funds are required to invest across market capitalizations (large, mid, and small-cap), whereas flexicap funds have more flexibility in their investment strategy and can have a tilt towards any market capitalization.
Portfolio construction: Multicap funds have a fixed allocation towards large, mid and small-cap stocks, whereas flexicap funds can change their allocation based on market conditions and fund objectives.
Risk Profile: Multicap funds generally have a balanced risk profile, whereas flexicap funds may have a higher or lower risk profile depending on their investment tilt.
Taxation of Multicap and Flexicap Funds in India:
Equity funds, including multicap and flexicap funds, are taxed differently based on the holding period.
Short-term Capital Gains (STCG) - If the holding period is less than 1 year, then STCG tax of 15% is applicable.
Long-term Capital Gains (LTCG) - If the holding period is more than 1 year, then LTCG tax of 10% is applicable for gains exceeding Rs. 1 lakh in a financial year.
Who is suitable for Multicap and Flexicap Funds:
Multicap Funds: Ideal for investors who are looking for a balanced investment portfolio and do not want to take a high-risk approach.
Flexicap Funds: Ideal for investors who are looking for a higher return potential and are comfortable with a higher level of risk.
Criteria to look at before investing in Multicap and Flexicap Funds:
Fund manager's track record: Look at the fund manager's past performance and experience in managing equity funds.
Fund's investment strategy: Check the fund's investment philosophy and process, and if it aligns with your investment goals.
Fund's portfolio diversification: Ensure that the fund has a diversified portfolio across sectors and market capitalizations.
Fund's expense ratio: Check the fund's expense ratio to ensure that it is reasonable compared to similar funds.
Fund's past performance: Look at the fund's historical performance, but keep in mind that past performance is not indicative of future results.
Note: It is always recommended to consult with a financial advisor before investing in any mutual fund.
Comments