Flexi-cap funds offer a dynamic investment strategy by allocating money across large-, mid- and small-cap stocks based on prevailing market conditions. Investing in these funds through systematic investment plans (SIPs) will help balance risk and reward, making them well-suited for volatile markets.
With mid- and small-cap valuations expensive, flexi-cap funds offer a balanced approach to investment. While large-cap stocks provide stability, mid and small-cap stocks offer growth potential, giving these funds an advantage in both risk management and generating returns.
These funds have shown the ability to deliver competitive long-term returns while managing risk, making them suitable for both growth-oriented and conservative investors. Top performing flexicap funds such as Edelweiss Flexi Cap Fund and Quant Flexi Cap Fund have yielded 46% in the last one year. Over a five-year period, Quant Flexi Cap Fund has given returns of around 33% and Parag Parikh Flexi Cap Fund 25%.
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Dynamic allocations
Unlike multi-cap funds, where 25% must be invested in each cap category, flexi-cap funds empower fund managers to shift the allocation based on market conditions. If mid- or small-cap stocks are overvalued, the fund manager will allocate more to large-caps for stability.
Conversely, if mid- or small-cap valuations become favourable, they can increase exposure to these segments, potentially enhancing returns. “This flexibility helps achieve a balance between risk and reward, offering a more resilient approach to navigating market fluctuations,” says Soumya Sarkar, co-founder, Wealth Redefine, an AMFI registered mutual fund distributor.
Currently, with mid and small-cap valuations appearing expensive, the focus has shifted towards low-beta, stable stocks to reduce risk exposure. Flexicap funds align well with this approach, as they allow investors to stay invested across market segments, capturing growth while minimising downside risk.
Flexi-cap funds benefit from active fund management, as managers can tap into opportunities in any market segment. “For investors seeking a balance between stability and growth, flexi-cap funds present an ideal solution, enabling them to weather volatility while benefiting from the diversified risk-reward profile,” says Anirudh Garg, partner, Invasset PMS.
Go for SIPs in flexicap funds
Investing in flexi-cap funds through SIPs helps spread investments over time and reduce the impact of market volatility. By combining the benefits of flexi-cap funds with the structured approach of SIPs,
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