Multicap funds are funds that invest across market cap segments, that is, they are a diversified funds investing in large cap, mid cap, and small cap stocks. SEBI mandates that multicap funds must invest at least 25% of its assets in each of the market cap segments. The remaining 25% of the fund assets can be invested at the discretion of the fund manager.
Why invest in Multicap funds?
Diversified investment
Multicap funds use a diversified investment approach with access to the entire market spectrum and not just limiting oneself to a single market cap. Given that different market segments perform differently at a given time, investing in large, small and mid cap segments can provide diversification to one’s portfolio.
Stability and growth
Large cap funds serve as a cushion in a choppy market, while mid and small cap help drive the alpha. Thus, multicap fund balances risk and rewards and has the potential of wealth creation in the long run.
Access to Entire Market Spectrum
Multicap fund invests across all three market cap segments, without any restriction of the market cap size. The focus is on picking the stock of a company with potential for long-term growth and wealth creation. Experienced fund manages pick stocks of fundamentally strong companies and stocks that have a potential for growth and wealth creation.
Who should invest in Multicap funds?
Investors new to the equity market
Since multicap funds have a diversified portfolio, it is well suited for investors new to equity. Multicap funds have a built-in risk management mechanism as the investment is spread across various market cap segments.
Unsure investors
Investors who are confused as to whether they should opt for large cap funds for stability or choose mid and small cap companies for growth may benefit from the expertise of the multicap fund.
Long-term investors
Multicap funds invest primarily in the equity market. A long investment horizon mitigates market volatility and helps in wealth creation. Therefore, multicap funds are well suited for investors with long-term goals such as early retirement, higher education, housing, and more. Experts recommend an investment horizon of 5 years for multicap funds.
Before selecting a Multicap Fund
Be sure to have an investment horizon of at least 5 years.
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https://www.sebi.gov.in/legal/circulars/sep-2020/circular-on-asset-allocation-of-multi-cap-funds_47542.html
Note: Market caps are defined as per SEBI regulations as below: a. Large Cap: 1st -100th company in terms of full market capitalization. b. Mid Cap: 101st -250th company in terms of full market capitalization. c. Small Cap: 251st company onwards in terms of full market capitalization.
Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 lakh). Trustee: Axis Mutual Fund Trustee Ltd.
Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Ltd. is not liable or responsible for any loss or shortfall resulting from the operation of the schemes.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.