All You Need To Know About Multi Cap Funds4 min readReading Time: 3 minutes
Multi Cap Funds are open-ended schemes that invest at least 65% of the total assets in equity and equity-related instruments. These funds maintain a portfolio of stocks that belong to different sectors and market capitalisation. You would find the portfolio holding a mix of large cap/mid cap and small cap stocks. Such a mandate provides the fund manager with immense autonomy to switch sectors actively to benefit from the outperforming segments of the market. A diversified portfolio like this helps to spread out the firm-related risks so that the NAV of the fund does not fluctuate as much as that of a pure Small Cap/Mid Cap Fund.
Multi Cap Funds balance growth, risk, and valuation to achieve capital appreciation in the long run. Your investments in a Multi Cap Fund grow by way of a steady rise in the price of the underlying stocks. If you are an investor who has an appetite for moderate-risk and plans to stay invested for at least 5 years or more, then these funds would be an ideal opportunity for you to accumulate wealth over the long term.
How Can I Assess Multi Cap Funds?
You can assess Multi Cap Funds through various financial parameters, beginning with your financial goals, risk tolerance, and investment horizon. Given below are some additional factors that can help you with analysing the suitability of a Multi Cap Fund:
1. Examine the history of the fund house:
It is necessary that you check the track record of the fund house where you want to invest your money. This gives you an idea about the experience and the potential of the fund house to handle market volatility. Fund houses that have a long investing history are assumed to be better at positioning the mutual fund in a manner that provides the best risk-return combination amidst market fluctuations. In addition to this, it indicates the stability of management at the fund house. You may want to shortlist funds that are managed by fund houses with a history of at least 5 years in the multi-cap segment. Also, avoid choosing a fund house simply based on its high performance in the short-term without confirming its consistency.
2. Assess the returns of the mutual fund:
You can compare returns of competitive mutual funds to confirm whether or not the fund would be able to accumulate sufficient wealth to help you to achieve your specific goals. However, as plain-vanilla returns may not give the complete picture, you can look at comparing funds on the basis of their risk-adjusted returns. Sharpe Ratio is an indicator of risk-adjusted returns, that explains the extra returns that a fund may generate for the extra risk taken. Along with this, you may also want to look for consistency in such returns.
3. Analyse the expense ratio of the fund:
The expense ratio is yet another parameter that you can use to compare peer funds. Expense ratio gives you an idea about the extent to which the funds’ assets are used to provide for the cost of managing a fund. A higher expense ratio is known to take down the fund returns considerably. Hence, you will be better off to invest in a direct plan of a Multi Cap Fund as it has a comparatively lower expense ratio. Direct plans of mutual funds can help you earn up to 1% higher returns as compared to regular plans.
Best Multi Cap Funds 2020
Multi Cap Funds, having ample diversification, are regarded as moderately risky opportunities as compared to pure Large/Mid/Small Cap Funds. These funds help you achieve financial goals like long term wealth creation, retirement corpus, education corpus, and the likes. Enlisted here are the best Multi Cap Funds for 2020.
How to Invest in Multi Cap Funds via Paytm Money?
Investing in Multi Cap Funds is a smart way to park your funds for your long-term financial goals. The Paytm Money app and Paytm Money website offer only the top-rated funds for you to pick from. Here are a few steps that you need to follow to invest in Multi Cap Funds:
Step 1: Download the Paytm Money app to complete your KYC & become investment-ready within minutes
Step 2: You can start investing both on our website and the App. On the home screen of the App, tap on the ‘Equity Funds’ given in the ‘Get Started with Mutual Funds’ section.
Step 3: On the ‘Equity Mutual Funds’ page, tap on ‘Multi Cap Funds’ followed by choosing a fund of your choice.
Step 4: Tap on ‘Invest Now’ via SIP and enter the amount of investment. Tap on ‘Proceed to Payment’.
Step 5: Make payment using Auto Pay, Netbanking or Debit Card. Tap again on ‘Proceed to Payment’ to complete the transaction.