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

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
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