Why You Should Explore Flexi Cap Funds5 min read
If you don’t know why you should explore Flexi Cap Funds, you’re in the right place! Flexi Cap Funds are a new type of mutual fund that invests at least 65% of its fund corpus in equity. The fund manager in this category has complete discretion in investing in the Large Cap, Mid Cap, and Small Cap segments.
As a result, Flexi Cap Funds invest your money across the market capitalisation spectrum. This means that fund managers have complete control over limiting or increasing exposure to a specific market cap segment based on how they expect that segment to perform in the future.
And this decision is based on the potential for growth, historical performance, and the risks that these companies and sectors entail.
A Flexi Cap Fund typically invests in companies with professional management and growth potential. Now that we have an understanding of what a Flexi Cap Fund is, given below is a list of 4 reasons why you should explore this fund.
1. Dynamic Asset Allocation
A Flexi Cap fund aims to capture stability of large-cap and growth potential of mid & small cap with an option to dynamically change the allocation.
Dynamic asset allocation is an investment strategy that involves frequently adjusting portfolio weights based on overall market performance or the performance of specific securities.
A portfolio manager employing the dynamic allocation strategy evaluates current market conditions as well as the performance of each asset class. The manager uses the assessment results to reduce the weights of assets that perform poorly and increase the weights of assets that perform well.
This allows you to explore the best performing asset classes ensuring that your portfolio has the highest exposure to momentum and reap returns if the trend continues. Conversely, portfolios that use dynamic asset allocation reduce asset classes that are trending lower to help minimize losses.
2. Portfolio Diversification
Diversification helps to generate consistent outcomes over the long term while lowering the risk.
Remember when you were a kid and you used to play hide and seek? The best strategy would have been for everyone to hide in different parts of the house. This way, even if one or two people were ejected, the remaining players had a chance to win the game. This is, in essence, what diversification is all about.
Portfolio diversification is the process of investing your money in various asset classes and securities in order to reduce the portfolio’s overall risk.
Diversification’s primary goal is to spread your risk so that the performance of one investment does not necessarily correlate to the performance of your entire portfolio.
3. Financial Flexibility
Flexi Cap Funds pursue opportunities across the market cap range and sectors. The ability to invest as a lump sum or at regular intervals, to transfer to different schemes or asset classes within the same fund family, or to ensure regular income at specified intervals is referred to as flexibility.
Money management can be stressful, especially if you’ve been attempting to create a financial plan on your own without the assistance of a professional. With so many future life events to consider — getting married, starting a family, buying a home, paying off your student loans, travelling, retiring, and so on — it can sometimes feel like you need to save every penny for the future and leave nothing for the present.
Spending money is almost unavoidable. And, while there are many opinions on how much you should have saved at each age, the race to accumulate wealth can make it difficult to focus on the here and now. This is why having some financial flexibility is essential.
4. Long-term Ownership
Flexi Cap funds facilitate the longevity of stock ownership as the fund does not have to rebalance portfolio due to market cap changes.
Individuals who take a long-term approach must be disciplined and patient. This is because investors must be willing to accept some risk in exchange for greater rewards later on.
Sticking to these long-term investment strategies can pay off in the long run. If you are in or near retirement, it may be tempting to invest your savings in low-return, conservative investments. However, you should consider the possibility that you will outlive your assets or that they will not keep up with inflation.
When you’re a long way from retirement, time is your most valuable asset. It may be tempting to withdraw from the market if you need extra cash or if the market is shaky, but doing so may cause you to miss out on valuable opportunities if stocks rise.
How can you explore Flexi Cap Funds?
Now that you know the 4 reasons why you should explore Flexi Cap funds, it is now important to discuss how you can do so!
If you’re interested in exploring Flexi Cap Funds, you can do so with the Invesco India Flexi Cap Fund NFO through the Paytm Money app (Android & iOS). The Invesco India Flexi Cap Fund is an open-ended dynamic equity scheme investing across large-cap, mid-cap & small-cap stocks. It is a fund that aims to identify winners across sectors and market cap based on relative attractiveness of investment opportunities.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Paytm Money Ltd SEBI Reg No. INA100009859 Regd Office: 136, 1st Floor, Devika Tower, Nehru Place, Delhi – 110019. The NFO offering is non Exchange traded products and Paytm Money Ltd (PML) is acting as an agent for distributing the same. Please note all disputes with respect to the distribution activity, would not have access to the Exchange investor redressal forum or Arbitration mechanism. This information is purely based on publicly available data (Data source: Scheme Information Document) and in no way to be considered as advice or recommendation.