Investor’s choice: Best multi cap funds to opt for

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Multi cap mutual funds invest across large, mid and small cap companies providing investors exposure to a diverse set of stocks across market capitalizations. Multi cap funds are often recommended as a core part of one’s portfolio given their potential to generate long-term capital appreciation. Here are some tips on analyzing and choosing the best multi cap funds based on expert preferences.

Understanding multi cap funds

Multi cap funds invest a minimum of 25% each in large, mid and small cap stocks as per SEBI guidelines. The balance 25% is allocated at the fund manager’s discretion. Their flexible investment approach across market caps allows investors to gain from opportunities across segments.  Multi cap funds aim to provide long-term capital growth by investing in stocks with growth potential across market caps. They offer the benefits of large cap stability, mid cap resilience and small cap growth.

Evaluating the best multi cap funds

Here are some parameters to analyze before opting for multi cap funds.

Long-term performance

  • The fund’s long-term CAGR returns compared to category average and benchmarks.
  • Steady outperformance over 5–10-year periods indicates consistency.

Portfolio composition

  • The distribution across large, mid and small caps.
  • Presence of quality stocks based on fundamentals.

Market capitalization coverage

  • Wider coverage and diversification across stocks and sectors to reduce concentration risk and volatility.

Fund manager’s track record

  • The fund manager’s experience in managing multi cap funds and their track record in generating returns across market cycles.

Risk-return profile

  • Higher returns over long term with moderate volatility and drawdowns.
  • Showing resilience in down markets.

Expenses and charges

  • Low expense ratio and reasonable exit loads resulting in higher investor returns.

Top rated multi cap funds

Based on the above criteria, here are the typical characteristics of top rated multi cap funds

– Consistent long term CAGR of 18-22% outpacing category average

– Invest across multiple stocks with exposure to quality companies

– Managed by experienced fund managers with proven track record

– Delivered healthy returns across market cycles with controlled volatility

– Expense ratio around 1.5-2%, exit load less than 1%

Benefits of investing in multi cap funds

Here are some of the key benefits of investing in well-managed multi cap funds-

  • Growth potential from mid and small caps besides stability of large caps
  • Diversification across sectors and market capitalizations
  • Managed by experienced professionals with research capabilities
  • Liquidity, transparency and regulation being a mutual fund
  • Ideal for investors with moderate to high risk appetite over long term
  • Simple to invest through Systematic Investment Plans (SIPs)
  • Potential to deliver inflation beating returns over long term

As seen above, quality multi cap mutual fund investments can make a good addition to an investor’s portfolio while providing long term capital appreciation. Conduct thorough research, evaluate historical performance and diversify across 2-3 top multi cap funds. Stay invested for long periods to benefit from the full growth potential.