Multi-Cap Funds or What should you choose?

Multi-Cap Funds

You know when you purchase equity mutual funds; you generally have a choice between large cap, mid cap and that of small cap funds. As an investor it could become quite challenging to choose funds within every single category based on a variety of strictures. One of the manners to overcome this problem could be Multi-Cap Funds. These multi-cap funds form a hybrid portfolio including large cap, mid cap and that of small cap stocks. In fact, such are the funds that begin with a distribution towards each category and then go about stock picking inside each category.

You have 2 options to choose in front of you…

  • You can either opt to allocate funds to large caps funds, mid-caps funds or that of small cap funds and manage these funds in a separate manner.
  • Alternatively, you can do investment in multi-cap funds wherein the fund manager automatically forms a portfolio of large cap, mid cap and that of small cap stocks.

What do you think who of these choices should you go for?

It is somewhat clear that there is merit in forming a hybrid portfolio of large caps, mid-caps and that of small caps. Over the longer period, the alpha generated by such a portfolio would be higher. The question is the procedure. Should you go for creating your own mix of large cap, mid cap and that of small cap funds or should you just go for a multi-cap fund? There are different factors to consider before you make your choice.

Simplicity of management

In terms of simplicity, the multi cap fund apparently makes the job easier for you. You need not panic about identifying the large cap funds, mid cap funds and that of small cap funds and determining on the allocations. The multi-cap fund manager does the distribution and creates a multi-cap portfolio for you.

Benefit of diversification

In terms of diversification, both these approaches do work really well enough. Whether you pick a multi-cap fund or whether you go for allocating yourself, the benefit of diversification across capitalization is obtainable to you in both the instances. Certainly, if you opt for doing it on your own then you might do the allocation of your choice in discussion with your financial advisor. The multi-cap fund is going to give it to you as a package.

Measuring in terms of flexibility

Allocating funds on your own to that of mid-cap and large cap funds caters you more flexibility to customize it as per your financial plan. The multi-cap fund managers are going to adopt one median approach to investing in multi-cap stocks whereas you can modify to your unique requirements. For example, in case you are 45 and do not have an appetite for tiny cap stocks, you can nip your cap combination in such way that you get eighty percent equity allocation in large caps and just 20 % in mid-caps. It is the flexibility that you do not receive in case of multi-cap funds.


So, these were a few things about multi cap funds and other fund. Make sure that you keep everything in mind before making the choice regarding the Best multicap fund.

About the Author: Rebecca

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