Last Updated on Feb 15, 2024 by Anjali Chourasiya
If you are concerned about market volatility and are unsure about which market capitalisation to bet on, flexi-cap funds can be your ally. Flexi-cap funds are relatively new to the equity funds pack. These funds can be invested in companies across market caps without any restrictions. You can invest one time or do the due diligence to choose the best flexi cap fund for SIP, as these funds are known to produce consistent returns.
In this article, we will delve deeper into understanding flexi-cap funds and their benefits, and also, by using Tickertape Mutual Fund Screener, we will explore the best flexi-cap funds in 2024.
Table of Contents
List of the top 10 flexi cap mutual funds (2024)
| Name | AUM (Rs. in cr.) | CAGR 3Y (%) | Expense Ratio (%) | CAGR 5Y (%) | 3Y Avg Annual Rolling Return (%) | SIP Investment |
| Quant Flexi Cap Fund | 2,901.20 | 35.98 | 0.77 | 32.70 | 41.61 | Allowed |
| JM Flexicap Fund | 1,237.57 | 25.95 | 0.58 | 24.69 | 29.11 | Allowed |
| Parag Parikh Flexi Cap Fund | 55,034.05 | 22.47 | 0.58 | 24.40 | 28.40 | Allowed |
| PGIM India Flexi Cap Fund | 5,928.21 | 16.10 | 0.41 | 22.43 | 28.44 | Allowed |
| HDFC Flexi Cap Fund | 47,642.42 | 25.19 | 0.83 | 21.86 | 32.66 | Allowed |
| Union Flexi Cap Fund | 1,863.80 | 19.27 | 0.94 | 20.99 | 25.80 | Allowed |
| Franklin India Flexi Cap Fund | 14,165.22 | 21.15 | 1.04 | 20.72 | 29.74 | Allowed |
| DSP Flexi Cap Fund | 10,067.00 | 15.74 | 0.72 | 20.18 | 24.37 | Allowed |
| Kotak Multi Asset Allocator FoF-Dynamic | 1,299.04 | 20.13 | 0.30 | 20.18 | 22.85 | Allowed |
| Edelweiss Flexi Cap Fund | 1,598.23 | 19.52 | 0.46 | 19.99 | 26.37 | Allowed |
Note: The above information is dated 14th February 2024. The parameters used to filter the list of top flexi cap mutual funds on Tickertape’s Mutual Fund Screener are:
- Category > Equity > Flexi cap funds
- Plan – Growth
- 5Y CAGR: Set high to low
What are flexi cap funds?
Flexi-cap funds were introduced by the Securities and Exchange Board of India (SEBI) on 8th November 2020. These funds are open-ended, dynamic investments that invest at least 65% in equity and equity-related instruments across different market capitalisations.
Fund managers of flexi cap funds can invest in companies of all sizes without limits on particular market segments. For instance, large-cap funds can only invest up to 20% in mid-cap and small-cap companies, whereas flexi-cap funds don’t have such restrictions. That’s one of the striking differences between flexi-cap funds and large-cap funds.
Since there are no limits on the market segment front, fund managers can invest based on a segment’s attractiveness instead of being restricted to a particular market segment, thereby giving better returns.
Flexi-cap mutual funds are ideal for long-term investment wealth creation, and the ideal time horizon for these types of funds is 5-7 yrs.
Features of flexi cap funds
- Diverse market capitalization: Flexi cap funds are not constrained to a specific segment of the market. They have the liberty to invest across large, mid, and small-cap stocks. This wide-ranging market capitalization exposure allows for a well-balanced portfolio, mitigating risk and capitalizing on growth opportunities in different segments of the market.
- Dynamic allocation: One of the hallmark features of Flexi cap funds is their dynamic asset allocation. Fund managers actively adjust the portfolio’s composition in response to market conditions and investment outlooks. This flexibility enables the funds to potentially lower volatility and enhances returns by shifting allocations towards the most favourable opportunities.
- Potential for enhanced returns: The unconstrained investment approach of Flexi cap funds provides a fertile ground for identifying and capitalizing on growth opportunities across the entire market spectrum. This strategic flexibility can lead to higher potential returns for investors, as the funds are not limited to the performance of a single market segment.
- Effective risk management: The diversified nature of Flexi cap funds serves as a risk mitigation tool. By investing across various sectors and market caps, the funds aim to reduce the impact of market fluctuations and sector-specific risks, potentially offering a more stable investment experience over the long term.
- Expert fund management: The management of Flexi cap funds is entrusted to experienced fund managers who possess deep market insights and analytical capabilities. Their expertise in evaluating market trends, conducting rigorous research, and making informed allocation decisions is critical for navigating through market cycles and seeking to maximize returns.
- Suitability for long-term investment horizons: Flexi cap funds are particularly well-suited for investors with long-term investment horizons. Their adaptability to market changes allows them to potentially benefit from compounding returns over time, making them an attractive option for building wealth in the long run.
- Liquidity: Investors in flexi-cap funds benefit from liquidity, as these funds allow for the buying and selling of units on a regular basis. This liquidity ensures that investors have access to their capital, should they need it, without facing significant barriers or delays.
Factors to consider before investing in flexi cap funds
Here are five essential factors to consider before investing in Flexi Cap Funds:
- Investment objective: First and foremost, assess how well a Flexi cap fund fits within your overall investment strategy. These funds are designed for investors seeking growth through a diversified portfolio that spans across large, mid, and small-cap stocks. Ensure that the fund’s objective aligns with your financial goals, whether it’s wealth accumulation, retirement planning, or saving for a specific milestone.
- Risk tolerance: Despite their diversified nature, Flexi cap funds come with their share of market risks, influenced by their exposure to different market segments, including the potentially volatile small-cap sector. Evaluate your risk tolerance to determine if you are comfortable with the level of market fluctuation that can occur in a Flexi Cap Fund. Understanding your capacity to absorb these risks without compromising your financial well-being is crucial.
- Fund performance history: While past performance is not indicative of future results, reviewing a fund’s track record can provide insights into how it has managed during various market conditions. Look at the long-term performance, particularly through different market cycles, to gauge the fund manager’s ability to navigate through volatility and capitalize on opportunities.
- Fund management expertise: The success of Flexi Cap Funds largely depends on the acumen of the fund manager in allocating assets across different market caps and sectors. Research the fund manager’s experience, investment philosophy, and track record. A skilled manager with a robust strategy and a proven history of adapting to market changes can significantly influence the fund’s performance.
- Expense ratio and fees: Be mindful of the costs associated with investing in Flexi Cap Funds, including the expense ratio and any additional fees. These costs can eat into your investment returns over time. Compare the fees with those of other funds and consider whether the potential for higher returns justifies the expenses. Lower fees do not necessarily mean better, but it’s important to ensure you are getting value for the fees paid.
4 benefits of investing in flexi cap funds
- Portfolio diversification – The portfolio of flexi cap funds consists of different industries. It is one way to diversify your portfolio and beat market volatility to enjoy consistent returns over the long term.
- Managed by seasoned fund managers – With their constant market analysis, fund managers can limit the exposure to risky segments to a minimum during a market correction, thus safeguarding your investment. This can protect your portfolio from an unexpected decline in a particular asset or industry caused by short or mid-term volatility.
- Investment across market cap – As mentioned above, large-cap funds are not allowed to invest more than 20% in mid-cap and small-cap companies. In contrast, flexi cap funds have the flexibility to invest in companies across market capitalisations, depending on the performance of a specific market segment.
- Exposure to foreign markets – Due to the 65% investment requirement in equity, fund managers of flexi cap funds can also invest in foreign markets. This offers global diversification to your investment portfolio.
Now that you have a list of the best-performing flexi cap funds in India and their benefits, the promising numbers and the idea of consistent returns might tempt you to invest straight away. But there’s an important aspect that we haven’t discussed yet –
What are the risks of investing in flexi-cap funds?
Despite showing positive performance in both CAGR – 3-yr and 5-yr, the only drawback of investing in flexi cap funds is that the fund managers of these schemes have the liberty to invest in any market segment based on their outlook. As a result, some flexi-cap funds may be more conservative than others but provide consistent returns. Hence, you should invest in a scheme that aligns with their risk tolerance.
How are flexi-cap funds taxed?
Flexi-cap funds are taxed like other equity funds, and according to the new Finance Bill 2023:
- Short-term profits (made within a year are taxed at 15% flat, irrespective of your applicable slab rate.
- Long-term returns in excess of Rs. 1 lakh (made after holding for more than 12 months) are taxed at 10% flat.
(Note: This rule applies to only those schemes that have invested 35% or more in equity)
Who should invest in flexi cap funds?
Investors seeking a diversified portfolio with the potential for growth across different market capitalizations should consider flexi cap funds. It may be ideal for those with a moderate to high risk tolerance, these funds offer exposure to large, mid, and small-cap stocks, dynamically adjusting allocations based on market conditions.
They may suit long-term investors aiming for wealth accumulation over time, who appreciate the value of expert fund management in navigating market volatility. Flexi cap funds are particularly appealing to individuals looking for a balanced investment approach, combining the stability of large-caps with the growth potential of mid and small-caps.
To wrap up
Flexi-cap funds can be an excellent option for investors who seek consistent returns without any restrictions on market capitalisation. And if you’re considering investing in flexi cap funds, selecting the best plan for your SIP investment is crucial. Therefore, we highly recommend that you do your due diligence before choosing the best flexi cap fund for SIP.
Choose the scheme that aligns with your risk tolerance and investment goals. Then, whether you want to go for a one-time investment or take the SIP route, either way, you can ensure that your investment portfolio is well-diversified and optimised for long-term wealth creation.
FAQs about the best flexi cap mutual funds
Should you invest in flexi cap funds?
For instance, Parag Parikh Flexi Cap Fund has a 3-yr CAGR of 24.20%, which leaves them in the top 5 flexi cap funds. The average return is somewhat similar to other mutual funds, but their portfolio boasts investment mainly across different market capitalisation and sectors like IT Services and Consulting, Investment Banking and Brokerage, Private Banks, and Specialized Finance.
Which index do flexi cap funds track?
What are the differences between a flexi-cap fund and a multi-cap fund?
Which is the best flexi cap fund to invest in for the long term in India?
Quant Flexi Cap Fund, Parag Parikh Flexi Cap Fund, PGIM India Flexi Cap Fund, and JM Flexicap Fund are some of the best flexi cap funds for 2024 based on the 5-yr CAGR. You can use Tickertape’s Mutual Fund Screener to discover the best flexi cap funds based on your desired metrics such as rolling returns, expense ratio, Sharpe ratio, 3-yr and 5-yr CAGR, AUM, and so on.
What is the minimum investment required in flexi cap funds?
As an insatiable reader and learner, I’ve spent the last two years exploring the world of finance. With my creative mind and curious spirit, I love making complex finance topics easy and fun for everyone to understand. Join me on my journey as we navigate the world of finance together!
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