Flexi-Cap funds can be good starting point for new investors

With a large number of new investors entering mutual funds amid broad indices trading at life-time highs, financial planners believe flexi-cap funds could be a good starting point. These schemes give flexibility to invest across companies of any m-cap, namely large, mid or small-cap companies without any restrictions.

What Are Flexi-Cap Funds?
According to regulatory guidelines, a flexi-cap fund is an open ended, dynamic equity mutual fund scheme. In this category, the fund manager can choose to invest across companies of any market capitalisation be it large, mid or small-cap — without restrictions. The fund manager has complete freedom here unlike other categories, where they need to allocate a fixed amount to a category. A flexi-cap scheme needs to have a minimum investment in equity and equity related instruments of 65% of the total assets of the scheme and the fund house is free to choose a suitable benchmark.
Why Do Financial Planners Suggest Them?
Financial planners suggest this category as the fund manager has complete freedom and there is no restriction on the fund manager to allocate to companies. As compared to this, schemes in large-cap, mid-cap, small-cap and multi-cap have restricted mandates and are constrained to stick to the companies that are defined by their portfolio. For example, a large-cap fund will have to invest a minimum of 80% in companies ranked 1 to 100 by market capitalisation, while a mid-cap fund needs to allocate at least 65% of its portfolio to companies ranked 101-250 by market capitalisation. This helps many investors who often are unable to decide whether to opt for large-cap, mid-cap, small-cap, multi-cap, or sectoral funds.

How Large Is The Category?

Flexi-cap is the largest category in the equity mutual fund space and the schemes manage a total of 2.9 lakh crore of assets. There are 37 schemes in this category.
Who Should Consider Flexi-Cap Funds?

Long-term or first-time investors, who do not want to take the trouble of individual stock selection and want to make a long-term allocation to Indian equities can opt for flexi-cap funds. Investors looking for just one fund in their portfolio which gives them access to the best companies irrespective of market capitalisation with the aim to balance risk and volatility and help them accumulate wealth to meet long-term goals can also consider such a fund. Investors looking to stagger their investments through systematic investment plans (SIP) could also look to using this category of funds.