A lot of investors are moving towards Flexicap Funds and for good measures. Flexicap funds allow investors to invest their money in various sections, companies of different sizes and even the option to change their allocation based on market conditions.
By investing in a Flexicap fund, you can gain exposure to companies of different sizes, that are aiding the Indian economy to move forward. Flexicap funds tend to do well in the long term horizon and are ideal if you hold on to your investments for at least five to seven years. The funds are actively managed and offer the flexibility for fund managers to change the allocations as per changing market dynamics. JM Flexicap Fund is one such fund and has consistently provided excellent returns over a longer period. Let us understand the basics to know who should invest in flexicap funds and what are the advantages of doing so.
Who should invest in Flexicap Fund?
Flexicap funds are ideal for individuals who prefer to stay invested for longer durations and want to create wealth. Investors who are willing to take a moderate risk and looking at an investment horizon of 5 to 7 years will find Flexicap funds fit into their portfolio quite naturally.
New and inexperienced investors who are confused and concerned about investing in small-cap, mid-cap or large-cap can benefit immensely from flexicap funds. Since the fund managers allocate the funds between different market capitalisation companies and sectors, these tend to give good returns over a time period.
So, if you are an investor who wishes to invest directly into the equity market for the long-term without any market cap restrictions, you can opt for flexicap funds. Thus, you give the fund managers the flexibility to allocate funds to any company to navigate the various market cycles and optimise the returns over time. However, you also need to understand how a flexicap fund works before investing in the same.
How do Flexi cap funds work?
Flexi-cap funds offer flexibility and diversification to investors willing to take moderate risks. SEBI allows these funds to be invested in different market caps in any proportion. They can rotate their assets between small, mid, and large-cap companies, enabling investors to earn more returns.
For example, let us look at the JM Flexicap Fund, which JM Financial Mutual Fund manages. Introduced in 2008, the fund has 97.4% of its total investments in the domestic equity market. Out of which 37.23% is invested in large-cap companies, 9.06% is invested in mid-cap companies, and 22.95% is invested in small-cap companies. The remaining 2.6% remains as a cash or debt component.
Here are the top 5 sectors in which the fund invests.
- Financials – 95%
- Materials – 54%
- Industrials – 18%
- Consumer Discretionary – 04%
- Finance – Banks – Private Sector – 45%
Here are the top 5 holdings in which the fund is invested.
- HDFC Bank Limited – 21%
- ICICI Bank Limited – 26%
- State Bank of India – 04%
- Infosys Limited – 90%
- TREPS – 77%
The above figures show how a well-performing flexicap fund works and how it provides good returns to investors by allowing them to diversify.
Why should you invest in Flexicap funds?
The current market condition can be a bit tricky to assess and invest in, and not all investors today have the time and knowledge to monitor investments daily. It is exactly the type of market where you need exposure to a Flexicap fund. Investing in funds like JM flexicap fund offers you a host of benefits, like the following.
- The investment style ensures that your capital is exposed to companies of different market capitalisation.
- Since the funds invest in different market caps and companies, there is moderate risk.
- The funds invest in different sectors and industries, giving you a more diversified portfolio.
- The funds offer flexibility in altering the investment based on the changing market conditions.
- Your returns will be subject to long-term capital gains if you hold on to it for at least a year. And long-term capital gains are comparatively lower.
- Its flexible nature ensures risk mitigation is more efficient.
Conclusion
Investors looking for an avenue to park their funds while adding a bit of diversification can consider flexicap funds. Its ability to change allocations based on market conditions allows for better diversification and is suited to long-term investments. With many options in the market, one should study the past results and the details of the fund managers and make an informed decision.
