Should You Consider Adding Flexi Cap Funds in Your Portfolio?
In This Article
There are different types of mutual funds in the market. Most of them have certain limitations to asset allocation. Equity funds invest mainly in equity and related schemes. Mid-cap and small-cap funds must allocate a minimum of 65% of funds to mid-cap and small-cap companies, respectively.
However, Flexi Cap Mutual Funds donโt have any such capping. Due to this, it can give high returns. In this article, we will understand why you should have flexi cap funds in your portfolio.

What are Flexi Cap Funds?
Flexi Cap mutual funds allow fund managers to invest without restriction in companies with different market capitalizations.
Fund managers have full freedom to rotate money between different types of companies and assets. They invest in performing companies or assets and, hence, get maximum returns.
Why should one invest in Flexi Cap Funds?
Many financial advisors these days are suggesting investors invest in flexi cap funds. There are a lot of reasons why one should invest in flexi cap funds. Letโs understand some of them:
- Flexibility
Flexi-cap funds are very popular among investors as their asset allocation is flexible. It is not restricted to a certain percentage of allocation to certain categories of companies like large-cap or equity mutual funds. The fund managers here have full freedom to change the asset allocation as the need arises.
They can decide what exposure they need to keep among equity, debt etc. Some flexi cap funds also have international exposure. Investing in flexi-cap funds can also reduce tax liability.
- Alternative to Multi cap funds
Flexi-cap funds are a very new category of mutual funds launched in November 2020. They are also considered a refinement of multi-cap funds. The only major difference between them is the capping restriction.
In multi-cap funds, the allocation of funds has to be a minimum of 25% to the three categories: large-cap, mid-cap, and small-cap. But in flexi-cap funds, there is no such restriction. They are fully flexible, and fund managers can invest in the proportion they feel is right for investors.
- Change of Allocation Possible
Fund managers are free to change the allocation of funds per the market conditions. They can shift to small caps and midcaps when there is a bull run. On the other hand, they can shift to a large cap if the market is volatile. This freedom is not offered in other hybrid funds.
This gives an opportunity to shift between funds and can give flexibility to fund managers as well as investors.
Conclusion
Flexi-cap funds are a new category of mutual funds that are highly flexible. There is no limit or restriction on asset allocation, and hence, they can give high returns. Fund managers can change the asset allocation in these funds as per market conditions. To invest in these funds, consider Dhan.