Multi Cap Funds Vs Flexi cap Funds – How Are They Different?

04 Jan, 20244 mins read
Multi Cap Funds Vs Flexi cap Funds – How Are They Different?

The vast Indian mutual fund landscape can be a dazzling yet bewildering spectacle, especially for the uninitiated. Terms like "multi cap" and "Flexi cap" dance across brochures and screens, leaving many investors wondering: "Which cap is for me?" Fear not, intrepid trekkers of the financial terrain! This blog will peel back the layers of these two versatile fund categories, unveiling their strengths, weaknesses, and the secret sauce that makes them tick.

Understanding Market Capitalization

Before we delve into the fund fight, let's decipher the language of the market – capitalization. Simply put, market cap refers to the total value of a company's outstanding shares. In India, companies are categorized into three camps based on their market cap:

  • Large Cap: Think titans of industry like Reliance Industries or HDFC Bank – these behemoths boast market caps exceeding Rs.20,000 crore.
  • Mid Cap: Filling the mid-ground are mid cap companies like Titan Company or Page Industries, with market caps between Rs.250 crore and Rs.20,000 crore.
  • Small Cap: Representing the potential for explosive growth, small caps like Laurus Labs or Affle Group have market caps below Rs.250 crore.

Multi Cap & Flexi cap Funds – Different Hats, Similar Goals

Now, meet the cap crusaders – multi cap and Flexi cap funds. Both aim to conquer the equity market, but their strategies diverge like seasoned gladiators:

Multi Cap Funds

  • SEBI's Balancing Act: Imagine juggling three golden orbs – large cap, mid cap, and small cap. Multi cap funds must keep at least 25% of their assets in each, ensuring a balanced spread across market segments.
  • Diversification Dynamo: This balanced approach acts as a shield, mitigating risk by not putting all eggs in one basket. Multi cap funds capture growth opportunities across caps, offering stability for long-term wealth creation.
  • Performance Predictability: While historically delivering moderate returns, multi cap funds can outperform large cap funds during bull markets and offer some cushion during market downturns.
  • Suited For: These balanced brawlers are ideal for beginner and risk-averse investors seeking long-term wealth creation with moderate risk and volatility.

Flexi Cap Funds

  • Freedom Fighters: Unlike the juggling act of multi cap funds, Flexi cap funds throw away the orbs! They have no restrictions on market cap allocation, granting the fund manager complete flexibility to invest wherever they see opportunity lurking.
  • Alpha Aspirations: This agility allows fund managers to pounce on emerging trends and high growth potential across the market spectrum, potentially leading to higher returns than their multi cap counterparts.
  • Risk Riders: Remember, with great freedom comes great responsibility. This flexibility also exposes investors to potentially higher volatility, making Flexi cap funds a playground for experienced investors with a high risk appetite.
  • Investment Horizon: Think long-term, like 5 10 years or more, when considering Flexi cap funds. They are not for the faint of heart or those seeking quick wins.

Choosing Your Fund: Multi Cap or Flexi Cap

This depends on your individual risk tolerance and investment goals:

  • For moderate risk and long-term wealth creation, multi cap funds offer stability, diversification, and predictable performance.
  • For a high-risk appetite and the potential for higher returns, Flexi cap funds offer flexibility and exposure to promising growth opportunities.

Both categories, however, come with inherent risks. Consulting a financial advisor before making any investment decisions is crucial, especially for navigating the dynamic terrain of Flexi cap funds.

Multi Cap v/s Flexi Cap Funds: Further Understanding 

  • NSE/BSE Market Capitalization Data: Track company market caps and categorize them for informed decision-making.
  • SEBI Mutual Fund Regulations: Stay updated on regulatory guidelines governing Indian mutual funds.
  • Mutual Fund Performance Rankings: Compare the performance of multi cap and Flexi cap funds to make data-driven choices.
  • Financial Planning Tools and Resources: Seek professional guidance to tailor your investment strategy to your specific goals and risk tolerance.

With the right knowledge and resources, you can navigate the world of multi cap and Flexi cap funds like a seasoned strategist. So, do your research, and choose the right fund that best empowers your investment journey.


  1. What are Multi Cap Funds and Flexi Cap Funds, and how do they differ in terms of investment strategy?

Multi Cap Funds and Flexi Cap Funds are both mutual fund categories, but they differ in their approach to asset allocation. Multi Cap Funds invest across large-cap, mid-cap, and small-cap stocks without any fixed allocation, providing flexibility. On the other hand, Flexi Cap Funds have the flexibility to invest across market capitalizations but with a mandate to invest a minimum percentage in large, mid, and small-cap stocks. The key difference lies in the degree of flexibility in their allocation strategy.

  1. How does the risk profile vary between Multi Cap Funds and Flexi Cap Funds?

The risk profile of Multi Cap Funds tends to be higher due to their flexible allocation across market caps. Since they can invest in mid and small-cap stocks, which are generally more volatile, the risk is elevated. Flexi Cap Funds, while also flexible, might have a relatively more balanced risk profile. Investors should consider their risk tolerance and investment horizon when choosing between the two.

  1. How do Multi Cap Funds and Flexi Cap Funds perform in different market conditions?

Multi Cap Funds may perform well in diverse market conditions as they can adapt to changing trends. In bull markets, the flexibility to invest in mid and small-caps can enhance returns. In contrast, Flexi Cap Funds may navigate market conditions by adjusting their allocation among large, mid, and small-cap stocks. Understanding the historical performance and fund manager's strategy is crucial for making an informed decision based on market expectations.

  1. What factors should investors consider when choosing between Multi Cap and Flexi Cap Funds for their portfolio?

Investors should assess their risk tolerance, investment goals, and time horizon. Multi Cap Funds may suit those comfortable with higher risk and seeking potential higher returns. Flexi Cap Funds could be a balanced choice for those looking for a mix of large and mid/small-cap exposure. Additionally, evaluating fund manager expertise, expense ratios, and historical performance can aid in making a well-informed decision.

  1. How does the recent SEBI categorization impact Multi Cap Funds and Flexi Cap Funds?

With SEBI's categorization norms, Multi Cap Funds are mandated to allocate a minimum percentage in large, mid, and small-cap stocks. Flexi Cap Funds, by definition, have the flexibility to move across market caps. Investors should be aware of these regulatory changes and consider how they align with their investment objectives. It is advisable to review fund documents and consult financial advisors for updated information on compliance with SEBI regulations.

disclaimer: the information provided in this blog is for general informational purposes only. it should not be considered as personalised investment advice. each investor should do their due diligence before making any decision that may impact their financial situation and should have an investment strategy that reflects their risk profile and goals. the examples provided are for illustrative purposes. past performance does not guarantee future results. data shared from third parties is obtained from what are considered reliable sources; however, it cannot be guaranteed. any articles, daily news, analysis, and/or other information contained in the blog should not be relied upon for investment purposes. the content provided is neither an offer to sell nor purchase any security. opinions, news, research, analysis, prices, or other information contained on our blog services, or emailed to you, are provided as general market commentary. stack does not warrant that the information is accurate, reliable or complete. any third-party information provided does not reflect the views of stack. stack shall not be liable for any losses arising directly or indirectly from misuse of information. each decision as to whether a self-directed investment is appropriate or proper is an independent decision by the reader. all investing is subject to risk, including the possible loss of the money invested.

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