Are Flexi Cap funds worth their salt?

What are Flexi-Cap funds?

Flexi-cap mutual fund is a type of Mutual fund that is not only limited to investing in businesses with a set market capitalization. The fund manager may have more investment options and diversification opportunities with a flexi-cap fund. The size of a company is not a boundary for flexi-cap funds, in contrast to other funds like mid-cap or small-cap funds. Any company, regardless of size, may be invested in via a flexi-cap fund.

As an investor, it is important to have easy access to your FlexiCap funds to stay informed about their performance in the market. Keeping an eye on your investments helps you make informed decisions about when to buy, sell, or hold on to your assets. By monitoring your fund's performance regularly, you can identify trends, make adjustments, and diversify risks to maximize your returns. Therefore, having the ability to access your FlexiCap funds easily and efficiently is very important for any investor who wants the best returns from the market and their funds

Why Flexi-cap funds?

Flexi-cap mutual funds are a type of mutual fund in which the fund managers invest based on the returns of the investment, not the size of the company. Unlike other mutual funds, such as large-cap or mid-cap funds, flexi-cap funds do not limit investments to companies of a specific size. Instead, the fund managers have the flexibility to invest in companies of any size, based on their potential to provide high returns. This allows for a more diverse portfolio and higher returns for investors.

Fund managers choose the best companies for their clients, some criteria that they consider while choosing the companies to invest in are:

Future potential: It is one of the most important things to consider as Mutual funds are directly related to the future. Investors tend to invest in Small cap companies that have promising futures and good return opportunities
Market Trends: The market is very volatile it tends to change every market, one of the roles that investors play is to keep a check on market trends as they might affect the assets, another very important part of the market is consumer, and change in consumer might affect the market.
Risk Management: Risk management is one of the very important tool as your portfolio should be diverse to avoid the risk or to reduce the risk and increase the returns

Pros of Flexi-Cap Funds

Flexi cap funds provide you with diversity to invest in various companies of different sizes and with different returns, it helps you to spread your risk to various sectors
Flexi cap funds are a good investment option for those who want to invest in equities across different market fluctuations. These funds can adapt to changes in the market by adjusting their investment allocations. This means that whether the market is experiencing a boom or a recession, flexi-cap funds can navigate different market phases and still deliver good returns
Flexi-cap funds have the potential to deliver higher returns compared to funds with smaller investment mandates, such as large-cap or mid-cap funds. By investing across the entire spectrum of companies, including those with high growth potential, flexi-cap funds can capture opportunities for capital appreciation.

Cons of Flexi-cap funds?

As Flexi-cap funds allow you to allocate your funds to different companies which leads to chances of volatility, volatility might lead to high chances of fluctuations and could be uncomfortable for some investors or the ones with low-risk capacity
While diversification is a key benefit of flexi cap funds, there's risk in over-diversification, especially if the fund holds a large number of stocks across various sectors. Over-diversification can dilute the impact of the fund's top-performing investments and limit the potential for higher returns sometimes.
Flexi-cap funds might not have a set performance standard, in contrast to funds with more specific investment mandates, like large-cap or small-cap funds. Consequently, investors may find it difficult to judge the fund's overall performance and to compare it against appropriate market averages.

Growth of Flexi-cap funds in the past

Some of the Growth rates of Flexi Cap funds in the past 5 years

Current NAV: The Current Net Asset Value of the Navi Flexi Cap Fund - Regular Plan as of Feb 21, 2024, is Rs 20.67 for the Growth option of its Regular plan.
Returns: Its trailing returns over different periods are: 27.97% (1yr), 15.81% (3yr), 16.31% (5yr), and 13.93% (since launch). Whereas, Category returns for the same time duration are: 32.96% (1yr), 16.33% (3yr), and 17.74% (5yr). 3.
Fund Size: The Navi Flexi Cap Fund - Regular Plan currently holds Assets under Management worth Rs 249.39 crore as of Jan 31, 2024.
Expense ratio: The expense ratio of the fund is 2.29% for the Regular plan as of Feb 04, 2024.
Exit Load: The given fund doesn't attract any Exit Load.
Minimum Investment: The minimum investment required is Rs 10 and minimum additional investment is Rs 10. The minimum SIP investment is Rs 10.

Hence, flexi cap funds offer investors a good opportunity to access a diversified portfolio of stocks across different markets and sectors, with a chance to adapt to fluctuating market conditions. Through attentive management and opportunistic investing, flexi-cap funds can deliver heavy risk-adjusted returns over the long term and it depends on the management of your portfolio and attentiveness towards the market fluctuation. But it can considered as a really good investing option in Mutual funds.

One of the biggest reasons to consider Flexicap funds is SEBI (Securities and Exchange Board of India) is the regulatory body that oversees and regulates the securities market in India, including mutual funds. In December 2020, SEBI introduced new regulations regarding flexi cap funds to enhance transparency, improve investor protection, and ensure alignment with the fund's investment mandate

Under the revised guidelines, SEBI defined flexi cap funds as open-ended equity schemes investing across large-cap, mid-cap, and small-cap stocks. SEBI mandated that flexi cap funds must invest a minimum of 65% of their total assets in equity and equity-related instruments

While flexi-cap funds have demonstrated the potential to outperform the standard and generate high returns, investors need to consider several factors before deciding whether to invest in these funds be it the risk tolerance or high volatility

FAQs

Is it good to invest in a Flexi Cap fund?

What are the disadvantages of flexi-cap funds?

As Flexi-cap funds allow you to allocate your funds to different companies which leads to chances of volatility, volatility might lead to high chances of fluctuations and could be uncomfortable for some investors or the ones with low-risk capacity
While diversification is a key benefit of flexi cap funds, there's risk in over-diversification, especially if the fund holds a large number of stocks across various sectors. Over-diversification can dilute the impact of the fund's top-performing investments and limit the potential for higher returns sometimes.
Flexi-cap funds might not have a set performance standard, in contrast to funds with more specific investment mandates, like large-cap or small-cap funds. Consequently, investors may find it difficult to judge the fund's overall performance and to compare it against appropriate market averages

Which is better Flexi Cap or Bluechip fund?

The choice between blue chip and flexi cap funds goes down to your investing choices and financial goals. Flexi-cap funds can be more suitable if flexibility and future growth are your top priorities. However, blue chip funds can be a better choice if reliability and consistent returns are your top challenges. Before deciding on an alternative, it's necessary to consider your timeline, investing goals, and risk tolerance.

What is the average return of Flexi cap?

The top-performing flexi-cap mutual funds include Quant Flexi Cap, JM Flexicap, and Parag Parikh Flexi Cap Fund, which have given more than 20% annualized returns in the past five years. Most investors choose the funds with better historical performance.