Skip to main content

Multicap Fund

Best SIP Funds Online 

Multi-cap mutual funds can invest in smallcap, midcap, and largecap stocks. The proportion in which these are held can be unique to each fund. This makes it difficult to compare one such fund to another


One of the basic equity funds that many advisers and distributors tell people to buy is a multi-cap fund. It is, in the truest sense of the word, a diversified equity fund because it aims to invest across stocks and sectors, and also in companies of different sizes: large, medium and small. But that also makes a comparison between two multi-cap funds a bit tricky. You should know that one multi-cap fund can be vastly different from another.

Divergence 

How much a multi-cap fund invests in large-, mid- and small-cap companies depends on its fund manager. If the equity market has fallen a lot and is at a bottom, according to the fund manager, then she may consider increasing the scheme's exposure to small- and mid-cap stocks. Typically, when equity markets rise, the small- and mid-caps rise first and faster. But if equity markets have risen enough already and valuations seem expensive—like many experts describe the current market situation as—then typically multi-cap fund managers tilt their portfolios towards large-cap stocks. Some fund managers may even avoid small-cap stocks altogether or keep their exposures low. 

Out of 59 multi-cap funds, 45 schemes had less than 10% of their respective overall portfolios in small-cap scrips. But a fund that invests, say, 7-10% in small-cap scrips can also behave very differently from one that doesn't have any small-cap scrip. Presence of small-cap scrips in a fund's portfolio makes the portfolio more volatile. Of course, the potential of returns increase but so does the risk.

Distributors say that if a fund manager can manage the risk, there's nothing wrong with a multi-cap fund holding such scrips. Some advisers, however, said they avoid those multi-cap funds that have a tilt towards small- and mid-sized companies. All multi-cap funds have a certain portion of their portfolios in shares of mid-cap companies (and some of them in shares of small-sized ones as well), but whether the portfolio tilts more towards them or away, is the question. Of the 59 multi-cap funds, 39 schemes have at least 30% exposure in such stocks. Four schemes have a majority of their respective portfolios in small- and mid-cap companies, with BOI Axa Equity Fund (BAEF) having 58% of its portfolio in mid- and small-cap scrips. 

Changing teams 

Although multi-cap schemes are supposed to diversify between large-cap and mid-cap (including small-cap) companies, sometimes the fund manager invests significantly in large companies. As a result, a multi-cap fund can also start getting classified as a large-cap fund. In March 2013, Reliance Vision Fund, an erstwhile large-cap fund got re-classified as a multi-cap fund. Six months later, it got re-classified as a mid-cap fund. In March 2014, it got re-classified as a multi-cap fund again. In September 2016, it became a large-cap fund. The fund house did not deliberately change the classification, as it has been managed as a diversified equity fund for many years now. This problem will go away next year as all fund houses will now have to strictly follow the new norms of fund classification as per the capital market regulator.  

What should you do 

Apart from the fund manager's track record, check your risk profile before you pick a multi-cap fund. Between two funds, just because one multi-cap fund gives higher returns, doesn't necessarily mean it is the better of the two. The higher returns may have also come because of an aggressive management, which may not hold in good stead always.




SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...

Mutual Fund MIPs can give better returns than Post Office MIS

Post Office MIS vs  Mutual Fund MIPs   Post office Monthly Income Scheme has for long been a favourite with investors who want regular monthly income from their investments. They offer risk free 8.5% returns and are especially preferred by conservative investors, like retirees who need regular monthly income from their investments. However, top performing mutual fund monthly income plans (MIPs) have beaten Post Office Monthly Income Scheme (MIS), in terms of annualized returns over the last 5 years, by investing a small part of the corpus in equities which can give higher returns than fixed income investments. The value proposition of the mutual fund aggressive MIPs is that, the interest from debt investment is supplemented by an additional boost to equity returns. Please see the chart below for five year annualized returns from Post office MIS and top performing mutual fund MIPs, monthly d...

NRI Corner: The process of remittances abroad

The process of remittances abroad, and back, is cumbersome. Here’s how you can wade through without hassles Approach The Right Place Outward remittances or the process of sending money abroad is governed by many regulations. In India, outward remittances are made mainly through banks. At the outset, you need to remember that you just cannot trust any individual or a financial firm with the responsibility of sending your money. Experts recommend that you should always try to choose a bank with an international footprint, which will make your job easier. Choose Mode Of Transfer The next step is to choose the mode of transfer. One option is to get a Foreign Currency Demand Draft ( FCDD ). This draft will be denominated in foreign currency and should be drawn in favour of the recipient/ beneficiary. The beneficiary does not necessarily need to have an account with the same bank. The other option is to send money via wire transfer. Do not be puzzled if the bank official uses the word SWIFT ...

Zero Coupon Bonds or discount bond or deep discount bond

A ZERO-COUPON bond (also called a discount bond or deep discount bond ) is a bond bought at a price lower than its face value with the face value repaid at the time of maturity.   There is no coupon or interim payments, hence the term zero-coupon bond. Investors earn return from the compounded interest all paid at maturity plus the difference between the discounted price of the bond and its par (or redemption) value. In contrast, an investor who has a regular bond receives income from coupon payments, which are usually made semi-annually. The investor also receives the principal or face value of the investment when the bond matures. Zero-coupon bonds may be long or short-term investments.   Long term zero coupon maturity dates typically start at 10 years. The bonds can be held until maturity or sold on secondary bond markets.

SBI bonds FAQ

  Maximum retail subscription and over – subscription There is a lot of excitement around these bonds, so I won't be surprised if they get over-subscribed on the first day itself. So, I thought Sameer asked a very good question about over-subscription. Here is that discussion. Here are some other questions that you may find useful. Can I trade the SBI bonds on NSE after it lists? Yes, these can be traded after listing. Where can I get the application forms, and can I buy the bonds online? You can get the application from notified branches, and then fill it up there and submit it. To the best of my knowledge, there is no way to invest in them online, but if anyone knows otherwise then please leave a message, and let us know. Can NRIs apply for these bonds? NRIs can't apply for these bonds as they fall under one of the ineligible categories. Can you take a loan by keeping the SBI bonds as security? The terms of the issue in the prospectus state that the bank shall no...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now