If you are hesitant, sceptical and want to take baby steps towards entering the mutual fund market, financial planners will usually advise you to go for Flexicap funds. These are all-weather funds which can become a core allocation of your start-up portfolio. What makes it an ideal starting point for any investor is the exposure to stocks across large, mid and small-cap companies all at once without restrictions. For a newbie, this market flexibility is important to diversify the risk and get the flavour of moderate returns, though comparatively higher than other fixed instruments. These funds can balance risk and return beautifully and you need not worry much about individual stocks as it is internally diversified across large, mid and small market capitalisations.
In this category, the fund managers are given complete freedom to choose stocks from all three types of companies, the large, mid and small caps. 65% of the total corpus can be invested in any of these three types of stocks and the fund house is free to choose its benchmark. This can balance your investment by diversification and counter the risk of volatility in a better manner.
What Are Flexicap Funds?
As the name suggests, this fund offers immense “flexibility” to fund managers as well as investors. As per the SEBI (Securities And Exchange Board of India) mandate, 65% of the assets of a Flexicap fund can be invested in a large, mid and small-cap fund. Unlike the schemes investing solely in large-cap, mid-cap and multi-caps, fund managers have the complete freedom to invest in all three types of stocks across the market. They can adjust and reallocate across stocks as per market needs to give you the best possible returns. The usual benchmark of returns for these funds is NIFTY 500 TRI and BSE 500 TRI.
A large-cap find’s 80% portfolio is mandated to be invested in companies listed between 1 to 100 as per market capitalisation. A mid-cap too is obligated to invest a minimum of 65% of its total assets in companies ranked from 101-250 by market capitalisation. A multi-cap fund must allocate 25% each to large, mid and small caps. Hence, fund management is restricted to these percentages, whereas in Flexicap the assets can be suitably allocated as per the market situation, helping in active management of your portfolio.
Benefits of Flexicap Funds for First-Time Investors
The major benefits of flexi-caps, that are alluring for first-time investors, include diversification, dynamism, active fund management and higher returns in the long run:
- If you are investing for the very first time, you might not be comfortable investing in a variety of funds. Flexi-cap gives you the option to invest in one fund and understand the performances of different types of stocks and the returns they can generate. Also, risk is significantly reduced once the assets of a fund are distributed across stocks across various market caps.
- Due to the freedom given to the fund managers of flexi-cap funds, they can actively manage the assets under management (AUM) by strategically allocating funds between large, mid and small-cap stocks to counter volatility and minimise risks.
- As a beginner, direct stock investment can eat into your invested capital due to its high-risk nature. It is also required that you have sound knowledge of the market and the companies to invest in shares. This makes it difficult for a retail investor to try his luck directly in the share market. However, through flexi-cap fund investment, you can gain experience in the market operation and dynamics without the risk associated with the direct method.
- Flexi-caps due to their dynamicity and adaptability, offer better risk-adjusted returns than direct stocks due to fewer inconsistencies and fluctuations. It strikes a balance between your returns and the risks associated with it.
- It is good to keep a long-term horizon when investing in flexi-caps. It gives adequate time to your investment to tide over any unstable situation in the market and perform better. Due to its resilient nature, in the long term a flexi-cap fund aids in wealth accumulation by steady returns.
How to Choose the Right Flexicap Fund?
With options galore, how do you know which flexi-cap to invest in that will help achieve your financial objectives? Considering these factors will assist you to make an informed decision :
- To reiterate, the fund performance significantly depends on the ability of the fund manager. As the tactical allocation of corpus across companies with a variety of market caps, a fund manager’s experience, knowledge and alertness can make a notable difference in returns.
- You also need to review the past performance of the fund over the years, compare them with other funds in the same category and also against the benchmark set by SEBI. It will give you a fair idea about the performance expected in future, although it cannot guarantee a high return in future.
- The expense ratio, though seems a small thing to consider, but can affect net returns in the long term. This is the charge that the scheme charges for the administration and operation of the fund.
Getting Started with Flexicap Funds
Are you still unsure of how to begin your investment journey with flexi-caps? If you have a regular income and are looking for a disciplined way of investing at regular intervals, a systematic investment plan will be the right choice for you. But if you feel your income may be erratic, set aside a lump sum amount to invest for the long term. No matter what method you adopt, assessing your own risk appetite and aligning your return expectation with your tolerance level should be the first step you take while investing for the first time in a mutual fund.
Top Flexi-Cap Mutual Funds for 2025
Here are the top performing flexi cap funds based on 5 yr returns:
| Fund Names | 1 yr returns (%) | 3 yr returns (%) | 5 yr returns(%) |
| HDFC Flexicap Fund | -2.01 | 20.40 | 24.23 |
| JM Flexicap Fund | -17.94 | 20.27 | 22.92 |
| Quant Flexicap Fund | -22.15 | 13.74 | 22.55 |
| PPFAS Flexicap Fund | 2.04 | 20.04 | 21.48 |
| Franklin India Flexicap Fund | -10.05 | 15.09 | 19.79 |
Conclusion
By now you must have a basic understanding of how flexi-cap funds work and why they should be your best option to start your journey in the mutual fund market. Their versatile nature along with diversified asset allocation and active fund management can help generate wealth in the long term. To be extra sure, check the fund’s past performances, the experiences of the fund manager and the various charges that may impact your net return before deciding on a particular scheme. Armed with some research about the top flexi cap funds in the market, you can be on your path to wealth creation in the long run.
