Multi Cap Funds are diversified mutual funds that invest in multiple market capitalizations like large cap, small cap, and mid-cap stocks. As compared to a pure large cap, mid cap, and small cap funds, these funds are popular among investors. The benefits of these funds are stability like large-cap fund and appreciation like small-cap and mid-cap fund. The fund managers of these funds are free to play across market capitalization. They can switch holdings and take benefits of market movements.
A multi cap mutual fund schemes are recommended schemes for moderate risk investors. Apart from that multi cap funds are also suitable for beginner and novice investors. It is advisable to invest in these schemes with an investment horizon of 5 to 7 years.
If you want to invest in multi cap funds, but not sure how to pick schemes here is a method for the selection of Multi Cap Funds.
Also Read –Top 20 Best Mutual Funds SIP to invest in India for 2018
How to select Multi Cap Funds for Investment?
Fund Objective – First thing you need to check is fund objective. Most of the multicap funds aim to generate wealth by diversifying investment. You need to check if the fund objective is matching with your financial goal or not.
Fund returns – The second thing you should consider is fund performance history of last five years. You should select the funds which have constantly beaten their benchmark index.
Fund Manager – One should look at the credential of a fund manager. Fund manager plays crucial roles in assessing the market condition and taking an appropriate decision of switching stocks.
Fund House Reputation – You should look at the reputation of Asset Management Company. The fund house should have a good business history of at least 5 years.
Financial Ratios – Financial ratio is another crucial factor for the selection of fund. One should look at expense ratio and sharp ratio while selecting multi cap fund. The sharp ratio indicates risk-adjusted return. The sharp ratio should be higher.
Financial Goals – Multi Cap Funds are generally recommended for long term. If you are planning to invest for long term goals such as children higher education or retirement planning, you can select multi cap funds.
Also Read – Top 5 Best Balanced Funds to Invest in India
Top 5 Best Multi Cap Funds for Investment
Motilal Oswal Multicap 35 Fund (G)
Fund Objective – To achieve capital appreciation by investing in equity related instruments across sectors and market capitalization levels.
Attributes of Fund
Asset Under management – 13860 Cr
Top Holdings – HDFC, HDFC Bank and Maruti
Highest Exposure – Financial
Highly rated fund with very good performance. It is fund with moderate high risk. This fund has generated 29.86% returns since launch. This fund is able to beat benchmark return.
Aditya Birla Sun Life Equity Fund (G)
Fund Objective – To generate long term capital appreciation from equity and equity related instrument. The scheme will also invest in IPO and other emerging sectors.
Attributes of Fund
Asset Under management – 9749 Cr
Top Holdings – HDFC, ICICI
Highest Exposure – Financial
Highly rated fund with very good performance. The fund is managed by experience fund manager. This fund has given 24% returns since launch. This fund invests in stock with visible and consistent growth at reasonable valuation.
SBI Focused Equity Fund (G)
Fund Objective – To provide long term capital appreciation by investing in a concentrated portfolio of equity and equity related securities.
Attributes of Fund
Asset Under management – 2964 Cr
Top Holdings – P&G, Bajaj Finance & HDFC
One of the oldest multi cap fund managed by experienced fund manager. Highly rated fund with good historical performance. This fund has generated 20.89% return since launch.
Kotak Standard Multi Cap Fund (G)
Fund Objective – To generate capital appreciation by focusing on few selected sectors.
Attributes of Fund
Asset Under management – 13158 Cr
Top Holdings – HDFC, Reliance, L&T
Kotak Standard Multi Cap Fund focus more on large cap companies. 70% of investment are in large cap and remaining in mid and small size companies. This fund has consistently beaten benchmark index. This fund is likely to generate stable returns.
SBI Magnum Multi Cap Fund (G)
Fund Objective – This fund invests 50-90 % in large cap stocks, 10-40 % in mid cap stocks and 10% in small-cap funds.
Attributes of Fund
Asset Under management – 5850 Cr
Top Holdings – Infosys, HDFC, ITC
SBI Magnum Multi Cap Fund is highly rated fund that is beating benchmark index consistently. This fund has given very good returns in past. It is good fund for investment.
Note – Above details is as on 22nd Aug,2018
Benefits of Multi Cap Funds
- Investor will get benefit of fund diversification.
- It offers the benefit of low volatility of large cap and higher growth potential of mid cap, small caps.
- Freedom to fund manager for managing multiple caps based on the market conditions.
- Beating average return posted by large cap funds.
Drawbacks of Multi Cap Funds
- If fund manager prediction about specific caps goes wrong, it will adversely impact the returns.
- An Investor needs to be cautious while selecting these funds.
- Generally suitable for an investor with long term horizon.
