{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.indusind.com\/iblogs\/investment\/what-is-multi-cap-mutual-fund\/#BlogPosting","mainEntityOfPage":"https:\/\/www.indusind.com\/iblogs\/investment\/what-is-multi-cap-mutual-fund\/","headline":"The Ultimate Guide to Multi Cap Mutual Funds: Everything You Need to Know!","name":"The Ultimate Guide to Multi Cap Mutual Funds: Everything You Need to Know!","description":"Putting money into mutual funds can be daunting, especially when markets are unpredictable. But knowing about different fund types can help ease your anxiety and boost your confidence when making investment decisions. In this blog, we will talk about Multi Cap Mutual Funds in detail. Let\u2019s get to the basics first: What are Multi-Cap Mutual...","datePublished":"2025-03-12","dateModified":"2025-03-18","author":{"@type":"Person","@id":"https:\/\/www.indusind.com\/iblogs\/author\/indusind_bank_pfx_team_indperformics-com\/#Person","name":"CONVONIX Antony","url":"https:\/\/www.indusind.com\/iblogs\/author\/indusind_bank_pfx_team_indperformics-com\/","image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/7d15b864167d3868c12ffdda340cc1c9?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/7d15b864167d3868c12ffdda340cc1c9?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"IndusInd","logo":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","width":201,"height":86}},"image":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/Importance-of-Financial-Planning.jpg","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/Importance-of-Financial-Planning.jpg","height":288,"width":764},"url":"https:\/\/www.indusind.com\/iblogs\/investment\/what-is-multi-cap-mutual-fund\/","about":["Investment"],"wordCount":1732,"articleBody":"Putting money into mutual funds can be daunting, especially when markets are unpredictable. But knowing about different fund types can help ease your anxiety and boost your confidence when making investment decisions. In this blog, we will talk about Multi Cap Mutual Funds in detail. Let\u2019s get to the basics first:What are Multi-Cap Mutual Funds?Multi-cap mutual funds are equity mutual funds that invest across companies of diverse sizes\u2014large-cap, mid-cap, and small-cap. This diversified approach allows fund managers to adjust portfolios based on market conditions, aiming for optimal returns while managing risk.Before we delve deeper into multi-cap funds, let us address market volatility first.Dealing with Market VolatilityMarkets are inherently volatile, with stock prices going up and down. This fluctuation is a normal part of investing, influenced by economic trends, policy changes, and global events. But if we look at the historical data, it is often true that certain mutual funds have made good money even when things were shaky. Over the years, the top-performing Indian multi-cap mutual funds have often generated strong profits in just one year, proving their ability to balance risk and reward effectively.If you want to invest in stocks but worry about market fluctuations, multi-cap mutual funds might be an excellent choice. These funds buy stocks of big, medium, and small companies. This mix lets the fund managers (people who are running the fund) change what they buy based on how the market is doing. They try to make the most money while keeping the risk low.Features of Multi-Cap Mutual FundsThe top 3 key features of a multi-cap mutual funds are:1. Diversified PortfolioMulti-cap funds invest in companies of different market sizes. This spreads risk across various sectors and industries. It lessens the impact if one segment does not do well.2. FlexibilityFund managers can move investments between large, mid, and small-cap stocks. This allows them to take advantage of new opportunities and adjust to market changes.3. Risk & RewardSpreading investments helps reduce risk. However, mid-cap and small-cap stocks can bring more fluctuations. This also opens doors for huge growth.4. Investment HorizonBecause these funds invest in various market sizes, it is best to invest for a longer time. Giving 5-7 years is advisable. This helps smooth out short-term changes and allows for higher profits.Also Read: The Importance of Financial PlanningTypes of Multi-Cap Mutual FundsThere are 3 types of multi-cap mutual funds1. Multi-Cap Mutual Funds with a Large-Cap FocusThese funds are invested in large-cap companies, offering stability with modest growth prospects. To increase returns, the fund managers allocate a smaller portion to mid-cap and small-cap stocks.2. Multi-Cap Mutual Funds with Mid-Cap FocusThese funds prioritise mid-cap stocks with an aim to balance stability and growth. They carry a higher risk but also have the potential to yield higher returns compared to large-cap focused funds.3. Multi-Cap Mutual Funds with No Specific FocusThese funds maintain a balanced allocation across large, mid, and small-cap stocks, providing broad market exposure and aiming to capitalise on opportunities across the spectrum.Advantages of Investing in Multi-Cap Mutual Funds1. Facilitates Diversification & Asset AllocationInvesting across various market caps and sectors helps in spreading risk and reducing the impact of any single underperforming asset.2. Easy for NovicesMulti-cap funds offer a one-stop solution for investors seeking diversified exposure without the need to select multiple funds.3. Provides Exposure to Varied SectorsBy making investments across a variety of businesses, these funds enable investors to profit from the growth of many economic sectors.Difference Between Multi-Cap Mutual Funds and Flexi-Cap Mutual FundsWhile both fund types offer diversified investments, they differ in structure and strategy. Let us take a quick look at their differences below:ParameterMulti-Cap Mutual FundsFlexi-Cap Mutual FundsMeaningThese funds invest across all market caps with a predefined allocationThese funds invest across all market caps with no fixed allocationMarket Cap AllocationAdhere to specific percentages allocated to large, mid, and small-cap stocks as per SEBI (Securities and Exchange Board of India) guidelinesNo specific allocation is mandated; fund manager decides based on market conditionsFund Manager DiscretionHave limited flexibility because of fixed allocation mandatesHave high flexibility to shift investment as deemed appropriateRisksComes with moderate risk compared to Flexi-Cap Funds because of SEBI-mandated exposure required across market capsRisk varies based on fund manager\u2019s strategy and market movementsWho Should Invest?Preferred by investors seeking structured diversification with defined exposure to all market capsPreferred by investors comfortable with dynamic strategies, trusting fund manager\u2019s decisionsTax Treatment of Profits Booked on Multi-Cap Funds Mutual FundsComprehending the tax implications is essential for effective financial planning:1. Tax on Capital Gainsa. Short-Term Capital Gains (STCG): The government taxes gains at 15% if the units are sold within a year.Example: You invest \u20b92,00,000 in a multi-cap fund and sell your units for \u20b92,50,000 after 6 months. In this case, the short-term capital gain is \u20b950,000. A 15% tax applies to STCG on any type of equity mutual funds. So, your net profit will be \u20b942,500 (\u20b950,000 – \u20b97,500) and your tax liability will be \u20b97,500 (15% of \u20b950,000).b. Long-Term Capital Gains (LTCG): Gains up to \u20b91 lakh are tax-exempted every year for units held for more than a year. The tax rate on gains exceeding this threshold is 10% without indexation.Example: You invested \u20b92,00,000 and sold your units after 2 years for \u20b92,80,000, the LTCG is \u20b980,000. Here, you do not have to pay any tax, as your gains are below the \u20b91 lakh exemption threshold.2. Dividend Tax: Dividends received on mutual fund investments are added to your taxable income and taxed as per your applicable income tax slab.Example: If you are in the 20% tax bracket and receive a dividend of \u20b910,000, you will have to pay \u20b92,000 in taxes on this income.Also Read: Union Budget 2025 Expectations: How It Will Impact the Stock Market and InvestorsWrapping up By fusing the stability of large-cap corporations with the growth potential of mid- and small-cap firms, multi-cap funds provide a well-rounded approach to equity investment. Because of their diversification, they are a desirable choice for investors who want to use a single fund to manage market volatility. But it is crucial to match your investment decisions with your risk tolerance and financial objectives. To make wise financial decisions, you must also think about speaking with a SEBI-certified financial advisor.Share This:"}