There are several large cap funds that invest in some of the biggest Indian companies. The mid cap funds invest in a mid-sized company that invest in mid -sized companies with large cap funds investing in large companies. This fund type is known as multi cap funds.
An equity mutual fund folder invests money that is gathered by an investor in the stock of companies. It is necessary for a mutual fund to be systematic in their investment approach. A large cap fund can invest in the top 100 companies where as a small cap fund would be investing in companies that are ranked below 250.
Know More: TOP 5 BEST MASTER IN FINANCE PROGRAMS TO BOOST YOUR CAREER
When the economy expands, it is possible for the fund manager to opt for higher exposure in mid-cap and small cap funds to be taking advantage of their growth. The moment the economy is in a slowdown stage in large cap stocks a higher degree of exposure occurs.
The benefits of investing in multi cap funds
- Diversification– as multi cap funds are investing across companies in various sizes and types, a diversified portfolio is offered. Such a diversified approach lowers down the risk to considerable levels. A reason being different sectors of the company tend to act differently at various times and spreading out the investments keeps the risk factor in control
- Exposure to the major sectors of the economy- The funds do not end up restricting themselves to a particular sector or industry, you are bound to gain exposure to all the sectors or companies that drives the economy forward. What it would mean is that you do not lose out on any opportunity emerging in the market.
- A proper portfolio keeping the marketing conditions at the back of your mind- A flexibility is provided between the large, mid or small sized fund so that you may alter the portfolio based on the situation of the market. An example is the middle and small sized funds may be overlooked and it may reflect that the space would be heading over to a big space. In such cases the fund manager may move over to large caps and a defensive approach can be taken.
See more: TIPS TO AVOID DEFAULTING ON YOUR CAR LOAN PAYMENTS
Who are best suited for investing in multi cap funds?
For a beginner it makes sense to be investing in multi cap funds. Due to their diversified nature it keeps the risk levels in control. Even the investors would be aware about the risks that is associated with investing in a company of a particular size, such a fund type is best suited for them.
Sometimes an investor is confused about whether they should be going for funds that invest in big companies for their relative stability. They can also opt for mid or small sized funds that may give them more profit but has a risk.
Also Read: ACCOUNTING SYSTEMS: WHAT ARE THEY & WHY DO YOU NEED ONE
For all your investing needs 5 paisa is the perfect platform. In addition if you are looking for some form of financial advice experts are there to guide you.