Multi Cap Mutual Funds are funds which invest in various stocks with diverse market capitalization. The main idea here is to boost the investor’s return. These funds invest in all market capitalization like large cap, mid cap, and small cap. Diverse capitalization reduces the risk and makes these funds popular among low-risk investors. If you are looking for Best Multi-Cap Mutual Funds for Investment in 2019 here is something interesting for you. In this post, I will share detail about How Multi-Cap Mutual Funds Works? What to consider while investing in Multi-Cap Funds? In the end, I will also share 5 Best Multi-Cap Mutual Funds for Investment 2019.
How Multi Cap Mutual Funds Works?
Multi-Cap Mutual Funds change market capitalization and allocation based on market performance. If you are able to spot smart and intelligent fund manager you can put your money in multi-cap fund. A fund manager plays a crucial role in multi-cap fund. The task for a fund manager is to rebalance the portfolio to earn a better return. Markets are cyclical in nature sometimes large cap does well, sometime mid-cap and sometimes small cap. The task of a fund manager is to diversify and maintain a balance between multiple caps.
The investor with moderate risk appetite can think of investing in multi-cap funds.
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What to consider while investing in Multi Cap Funds?
Factors for the selection of good multi-cap funds are given below.
Fund Objective – You should check the fund objective first. Most of the multi cap funds are intended to generate wealth by diversification. You should verify that the fund objective is meeting with your financial goal or not.
Fund Performance – The second factor you can consider is fund performance history. You should see performance history of the last five years. The fund returns should be seen with respect to the benchmark. The fund should have beaten their benchmark index constantly.
Fund Manager Credential – A fund manager plays a crucial role in the selection. One should look at fund manager experience and knowledge carefully. The fund manager has to take a crucial decision of switching stocks and market caps.
A reputation of Fund House – 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 a multi-cap fund. The sharp ratio indicates a risk-adjusted return. The sharp ratio should be higher.
Financial Goal – Multi-Cap funds are usually purchased for the long term. If you are planning for the short term you should avoid these funds.
Top 5 Best Multi Cap Mutual Funds for Investment 2019
Advantages of Multi Cap Funds
1. Diversification helps an investor to reduce the risk.
2. You can get the benefit of low volatility of large-cap and higher growth potential of mid cap, small caps.
3. Fund manager gets the freedom to manage multiple caps based on the market conditions.
4. Beating average return posted by large-cap funds.
Disadvantages of Multi Cap Funds
1. A wrong decision of fund manager may adversely affect the returns.
2. An Investor needs to be cautious while selecting these funds.
3. Generally suitable for an investor with a long-term horizon.