Are you the type of investor who wants to take advantage of all types of market capitalizations and is in search of the right investment product? If yes, then here is the fund you are looking for – multi-cap mutual funds. Let’s take a look into how you can maximize your returns by investing in multi-cap funds:
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Multi-cap funds are a type of diversified equity funds that invests in stocks with different market capitalization. These funds can take advantage of and benefit from all market capitalizations from investment.
Thus in the long-term, multi-cap funds can help you get better returns if handled properly. This is because these funds can take advantage of the investment opportunities across the market like you will have exposure to companies of various market capitalizations and thus you can shift funds from one market capitalization to the other.
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While investing in multi-cap funds, you must look into the following factors:
The fund returns or the performance of the fund is an important criterion for the selection of multi-cap funds. As an investor, you must compare the returns of the funds with its peer funds and compare the returns. Select the fund that has given a consistent performance over a period.
As an investor, you must evaluate the performance of the Fund Management Company and the performance history of the fund manager. It is essential to enrol under a reputed fund house while investing in Multi-cap funds. You must also cross-check the reputation of the asset management company and evaluate its performance in the past with respect to multi-cap funds. Additionally, you must also evaluate the performance of the fund manager. Good research on these factors will allow you to be on the safer side and invest through the best performing fund house.
A lower expense ratio can increase your returns from the fund. Thus as an investor you must choose a scheme that comes with a reasonable expense ratio so that your overall returns is greater.
While deciding to invest in multi-cap funds you must consider the risk-return ratio as an important aspect. Among the financial ratios, the Sharpe ratio gives you an idea of the risk-adjusted returns. More the Sharpe ratio, the better is the risk-adjusted returns for the particular fund.
There is a risk factor associated with these funds since they invest in small-cap and mid-cap stocks. Thus while investing in such funds you must go for funds headed by specialized fund managers. The movement of funds during market down periods and proper investment strategies may amplify your returns on these funds.
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If you are a moderate risk-taker and do not want to get into the hassle of market trends then multi-cap funds are ideal for you. Multi-cap funds provide stable returns and are known to keep the risk low.
Multi cap funds are also a great option for beginners and investors who want to take low or moderate risk. These funds can invest across various market capitalizations and can take advantage of the market highs and lows. Thus these funds can balance the risk thus providing greater stability and flexibility to the investor. Also, a good fund manager can change the portfolio compositions to suit the market conditions and the investor’s objective to maximize returns and minimise the losses.
The multi-cap funds are good options for moderate risk takers as these schemes also invest in small-cap and mid-cap stocks. Thus they tend to be riskier than large-cap schemes that mainly invest in the stocks of established and reputed companies.
Thus the fund manager of these funds can increase his exposure to mid and small-sized companies and amplify the returns under right circumstances. The fund manager has a greater role to play in the management of these funds.
Listed below are some of the multi-cap funds that can be named as the best funds due to their consistent performance over the last decade:
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