Why Multi-cap Mutual Funds Are A Safer And Profitable Way Of Investment

In India, there has been a rise in investments in recent times. People are now taking risks and investing their money in the stock market, FDs and mutual funds. These investment options tend to offer good interest rates and help multiply the money, depending on market conditions. Even though investing money is risky as it is dependent upon various factors, certain types of investment options allocate the money in different sectors and offer a better return than FDs.

One such investment option is multi-cap funds. By investing money in this scheme, one can get the benefit of investing in three market caps, i.e., small, mid and large, in a balanced manner.

One of the most special features of a multi-cap fund is that it not only involves less risk as compared to small-cap funds, but the average return of this fund has till now been higher than that of a large-cap fund. Multi-cap funds have given an average annual profit of 19.21 per cent in the last 5 months, 31.01 per cent in three years, and 20.09 per cent in 10 years. It is also important to note that one can start their SIP in multi-cap funds with just Rs 100.

What Are Multi-Cap Funds?

A multi-cap mutual fund is a form of equity mutual fund that invests in a diverse portfolio of securities with varying market capitalisations, such as large, mid and small-cap corporations. A multi-cap fund’s goal is to expose the funds to firms of various sizes. This is done to diversify the portfolio and lower the risk. According to the new rules of SEBI, multi-cap funds have to invest 25 per cent each (i.e., 75 per cent in total) in small-cap, medium-cap and large-cap funds. The remaining 25 per cent can be invested by the fund manager, depending on market conditions.

Some Popular Multi-Cap Funds in the Market

According to ET Money, the Nippon India Multi-Cap Fund has returned an average of 26.41 per cent over the last five years. Similarly, the Quant Active Fund has returned 29.13 per cent. In the last five years, Mahindra Manulife Multi Cap Fund has returned an average of 25.27 per cent to investors. ICICI Prudential Multi-Cap Fund has a five-year annual return of 20.99 per cent.