July 18, 2024

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Are multi-cap mutual funds required to be invested in?

3 min read
mutual funds

Although many financial gurus will tell you to take your risk tolerance into account before making any major investments, the truth is that none of us can be neatly classified as having a low, high, or even moderate tolerance for risk. Therefore, you should carefully consider if your risk tolerance is best served by a large-cap, small-cap, or mid-cap fund. Multi-Cap Mutual Funds fill this need. Now we’ll go into Multi-Cap Funds and examine the many aspects of them that you should be aware of.

What are Multi Cap Funds?

Multi Cap Funds, as the name implies, invest their resources in a diversified portfolio of equities and equity-related securities issued by firms with a wide range of market capitalizations. A Multi Cap Fund, therefore, is a kind of mutual fund that invests across market capitalizations, including those of big, small, and mid-sized businesses. The Multi-Cap Fund classification offers a variety of options to suit your risk preferences since each plan invests in various quantities.

You should know that the fund managers of your big, small, or mid-cap investments are bound by the portfolio specification. This implies that the management of a large-cap fund cannot take advantage of a potentially profitable opportunity by purchasing shares in a small-cap firm. Since the managers of multi-cap funds may take advantage of investment opportunities throughout the market, they are seen as the best way to build wealth. In addition, there is a multi-cap strategy that will work for any kind of investment.

When should you invest in a Multi-Cap Equity Fund? 

Long-term wealth growth is the goal of Multi-Cap Mutual Funds, which may be a good fit for investors with moderate risk tolerance. These plans take a well-rounded, diversified strategy to the stock market, seeking to maximize returns at every turn. 

Risks of multi-cap equity funds 

A multi-cap fund invests in equities funds of large-cap, mid-cap, and small-cap firms. This means the schemes are riskier than those that focus on investing in huge corporations. In addition, a multi-cap scheme’s fund management is always on the lookout for profitable possibilities in the small and mid-cap markets. He may also shift the money from stocks of mid/small-cap firms to those of large-cap companies if he believes the markets will remain down for an extended period of time. The volatility of these systems is high, to put it briefly.

Fund Manager

Multi-cap funds invest in the stocks and other equity-related securities of firms with varying market caps. The fund manager is also always on the lookout for new ways to broaden the portfolio’s exposure to risk in order to meet the scheme’s goals. It follows that the function of fund management is vital to the achievement of such goals. You should look at the fund manager’s track record in other schemes before committing any money. You should also consider his performance as a multi-cap fund manager during market ups and downs.

Portfolio Concentration

In order to protect your investment and reduce risk, you should evaluate the fund’s portfolio concentration. You run the danger of having too much of your portfolio invested in one area if, say, the fund manager is bullish on the IT industry and allocates a disproportionate amount of the corpus to small-, mid-, and large-cap stocks of firms operating in that industry.


As with every other mutual fund, a multi-cap fund may not suit everyone and cannot be recommended unilaterally. At the same time, they may work best for you if the above-mentioned information suits your investment style.

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