Multi-Cap Balanced Fund

Investment decisions are sometimes hindered by a series of questions. Should we go for large-cap funds for stability or small-cap funds for aggressive growth? Various investment experts recommend that it depends on your risk appetite and tolerance before making any type of decision. You cannot define risk tolerance as low, medium, and high. Henceforth, a large-cap, small-cap, or mid-cap fund might not be in synchronization with your risk selection. This is the point where multi-cap funds come into play.

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Let’s discuss the various factors related to Multi-Cap Funds -  

Multi-Cap Balanced Funds 

Multi-Cap funds are the diversified type of mutual funds which are invested in stocks across the capitalization of the market. They invest their amount in a portfolio of equity and equity-related company stocks with changing market capitalizations. Multi cap funds include investments in large-cap, small-cap and mid-cap companies. Each scheme of investment is different from others and this unique feature makes the multi-fund category the right option to match with the risk tolerance. 

The fund managers are limited by the portfolio when you invest in large, small, and mid-cap funds. This simply means that a fund manager of large-cap funds is not allowed to invest in the stocks of a small-cap company even if the deal is profitable. A multi-cap is a smart decision for wealth creation goals as the fund managers of these funds can influence the investment over the market. In addition to this, every investor needs to find a multi-cap scheme in synchronization with the financial requirements and objectives.  

Types of Multi-Cap Funds 

The multi-cap funds are majorly classified into three categories: 

  • Multi-Cap funds having the focus on the large-cap shares – They mainly focus on the investment in large-cap companies and then exploring the prospects in the small/mid-cap segments. 
  • Multi-Cap funds having the focus on the small/mid-cap shares – They mainly focus on the investment in small/mid-cap sectors. 
  • No particular focus on the capitalization of the market – These type of schemes concentrates on the investments across the capitalization of markets. 

How do Multi cap funds work? 

Multi cap funds are required to be definite in the investment method. A large-cap scheme is only allowed to finance the shares of top-ranked 100 companies based on the capitalization of the market. While small-cap schemes mainly finance in companies, ranking below 250. So, a multi-cap fund is the safest solution that does not have a distinct structure and these funds are invested in large, mid, and small-cap shares. The proportion might vary depending on the role of the fund manager. The fund manager checks the market situation and consequently adjusts the part of large, mid, and small-cap shares in the multi-cap fund's portfolio. 

Benefits of Investing on Multi-Cap Funds

  • Divergence – Multi cap funds are invested across various companies based on their size and segments, thus offers a diversified investment portfolio. This type of approach decreases the risk because different segments of the market perform differently at any given point, and this expansion of the investments controls the risk.  
  • Introduction to all economy segments – These types of funds do not limit themselves to a specific sector of the market. In this, you get an experience of all the companies and the sectors that are accelerating the economy of India in a forward direction. 
  • Right Market Portfolio – In this, there is a flexibility to choose a combination between large-cap, mid-cap, and small-cap that helps to change the composition of the portfolio in a way that suits the market situation. 

Who is Suitable for Multi-Cap Funds? 

  • Confused Investors – Various investors are in the dilemma that whether they all should opt for funds that finance in large companies or opt for mid-cap and small-cap funds that offer good growth but have a risk. So, Multi cap funds are considered most important in such situations. 
  • Investors want to opt for mid-cap and small caps but without much risk – Mid and small-cap funds offer different growth opportunities. Some investors do not want to lose these opportunities and also, they don’t want to bear any risk or are not content with the volatility. 
  • First-time Investors – Multi cap funds are the ideal option for first-time investors, because of their diversified investment portfolio and they also keep risk in control. 
  • Investors with a long-time investment prospect – Investors with a long-term financial objective such as children’s education, early retirement, buying a house, etc. can invest in multi-cap funds. It can help to fulfill all your goals. While investing in multi-cap funds, an investment horizon of 5 years is allowed. Long prospects in these funds act as a shield against the instability of equity markets. 

Top 10 Multi-Cap Balanced Funds

The performance is based on the returns that are offered by the fund in the last few years, 

Name 

3-year Returns (in%)

5-year Returns (in%)

Quant Active Fund Growth 

26.93

22.69

Invesco India Multicap Fund Growth 

13.65

14.63

Principal Multi Cap Growth Fund Growth

14.37

15.69

ICICI Prudential Multicap Fund Growth 

12.21

12.96

BNP Paribas Multi Cap Fund Growth 

15.89

14.16

Average 

17.10

15.82

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Final Word 

Multi cap funds provide a broader and more diverse range of investment portfolios. Investment diversity is a very important factor across these fund options. This means that the returns will be generated based on your investment. So, investing in multi-cap balance funds allows you to enjoy the benefits of the optimum return in the long run.

Disclaimer - ** “The investment risk in investment portfolio is borne by the policyholder”

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