What is Flexi Cap Fund? Features & Benefits

Flexi Cap Fund is a type of mutual fund that invest in various stocks of companies irrespective of their market capitalization. So it does not matter what the market cap of a company is, Flexi Cap Fund can invest in various companies, unlike other types of mutual funds that mostly invest in companies based on their market cap. These funds have more risk since they can invest in small cap companies as well to get better returns and is best suited for young long term investors.

Let us understand about Flexi Cap Fund in more detail.

Table of Contents

What is Flexi Cap Fund?
How Flexi Cap Fund works?
Benefits of Flexi Cap Fund
Taxation on Flexi Cap Fund
Conclusion
Frequently Asked Questions

What is Flexi Cap Fund?

Flexi Cap Fund is a type of equity mutual fund that invest in stocks of different companies irrespective of their market capitalization
Market capitalization or Market cap is the value of the company that is obtained by multiplying stock price of the company with outstanding number of shares
Most of the mutual funds invests based on the market cap such as large cap, mid cap or small cap companies in order to balance the risk and returns from these companies
But Flexi Cap Fund is different. They can invest in any company irrespective of market cap
These funds are risky in nature but also give high returns compared to other mutual funds based on the stocks in portfolio

Let us now see how Flexi Cap Fund works.

How Flexi Cap Fund works?

The fund is assigned a fund manager who is responsible to select stocks in the portfolio
The fund manager with his or her experience will try to select best stocks based on their expected future performance in order to include in the fund portfolio
Unlike other mutual funds, the stocks are not selected based on their market cap (market capitalization), instead they will be selected based on their expected future growth and the economy
These funds are highly risky in nature for short term investors, since the fund manager can invest in those companies who are ready to take risks for growth
Over long term, Flexi Cap Fund gives good returns to investors and are ideal for young long term investors

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Benefits of Flexi Cap Fund

Below are some of the benefits of Flexi Cap Fund:

Diversification:
The stocks selected under Flexi Cap Fund are diversified in nature and does not belong to any specific market cap unlike other mutual funds
Better Returns:
These funds provides better returns compared to other mutual funds since they invest in the future growth of the companies
Flexibility:
The fund manager has the flexibility to select stocks irrespective of the market cap conditions that are applied in other mutual funds

Taxation on Flexi Cap Fund

You need to pay tax on profits made using Flexi Cap Fund similar to other equity mutual funds:

STCG Tax – Tax of 15% on profits made on mutual fund units that are held for less than 1 year
LTCG Tax – Tax of 10% on profits above Rs. 1 Lakh in financial year, made on mutual fund units that are held for more than 1 year

You can Read about Income Tax on SIP here to get more details about Taxation on Mutual Funds.

Conclusion

So Flexi Cap Fund allows the fund manager to select the stocks irrespective of the market cap conditions, which helps them to take high risk and get better returns for you. These funds are best suited for young investors looking for long term growth of their wealth and are ready to take risk.

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Frequently Asked Questions

Is Flexi Cap better than index fund?

Index fund is the mutual fund which invest in top companies in NSE or BSE exchanges, where as flexi cap fund invest in any company’s stocks which the fund manager feels can have the future growth potential. If you can take risk for high rewards, than flexi cap funds are better for young investors, where as if you want to take less risk with some less returns than index fund is good for you. In both cases, you should be investing in them for achieving your long term financial goals of at least 5 years.

Is Flexi Cap Fund good for SIP?

Yes flexi cap fund is one of the best mutual funds for SIP (Systematic Investment Plan). You can slowly accumulate amounts via SIP and reach your financial goals using flexi cap fund

Which is better Midcap or Flexicap?

Midcap and flexi cap funds both can help you to achieve your long term goals. In mid cap mutual funds, the fund manager selects majority of the mid cap companies in the portfolio, where as in flexi cap fund, the fund manager has the flexibility to select any mutual fund irrespective of their market cap. Flexi cap are more risky compared to mid cap but can also provide better returns over long term.

Who should invest in Flexi cap?

Young investors with long term goals of at least 5 years or more who can take some risk should invest in flexi cap fund as they get the opportunity to use the fund manager’s experience in order to maximize their returns over long term. Conservative investors who are looking for low risk mutual funds should stay away from flexi cap funds since they are risky in nature.

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