Every fund, whether it is large-cap, small-cap, or mid-cap, has its own set of pros and cons. For instance, large-cap funds offer stability but lower returns, while small-cap funds offer higher returns but possess higher risk as well. So, to strike a balance, flexi-cap funds were introduced. This article will tell you about how these flexi-cap funds, like parag parikh flexi-cap fund, work and why you can consider these funds for the balanced growth of your investment portfolio.
What are flexi-cap funds?
Flexi-cap funds, as the name suggests, invest across stocks of companies irrespective of their market capitalisation. As per SEBI and AMFI, these funds have to invest a minimum of 65% of their asset into equity and equity-related investment instruments, but that can be done without considering market capitalisation. So, at one point in time, the fund can have 50% of large-cap stocks, while at other times, it can have small-cap stocks majorly. The flexibility in the flexi-cap funds offers better risk management, and thus returns increase as volatility can be managed.
How flexi-cap funds are different from other funds?
Most of the equity funds are restricted by minimum asset allocation in certain stocks as per market capitalisation. Even though there are multi-cap funds that invest across stocks with different market capitalisations, 25% should be invested in each of these market capitalisations. This is not the case with flexi-cap. Flexi-cap funds can alter their asset allocation as per the market scenario.
So, if the market is going down or highly volatile, small-cap or mid-cap stocks will fluctuate heavily, and thus returns will get affected. In this scenario, the fund manager of the flexi-cap fund can alter and put the majority of the AUM of the fund into large-cap stocks, which don’t fluctuate during volatile markets like small or mid-cap stocks. This helps in providing better risk-adjusted returns for the investors who invest in the flexi-cap funds. (https://www.caprinow.edu/)
Who should invest in flexi-cap funds?
The flexibility of these flexi-cap funds makes them suitable for all types of investors, and one can invest in this fund at any point in time. The reason being the fund offer moderate risk and better returns. Also, the returns are risk-adjusted, so risk-averse people can also get benefitted by investing in these funds.
Why should you consider flexi-cap funds?
The rationale behind investing in flexi-cap mutual funds like parag parikh flexi-cap fund by Parag Parikh Mutual Fund could be the following –
- Provide better returns than other equity funds over the long-term, say for five years or more, at lower risk. The main thing to notice here is the lower risk associated with these funds, even when the returns are good.
- Usually, due to risk adjustments, and other factors, the returns offered by flexi-cap funds are inflation-beating returns. This means that if there is a certain level of inflation in the market, your returns from the fund are higher than that.
Is Parag Parikh flexi-cap fund a good investment?
Parag Parikh Mutual Fund offers one of the top-rated flexi-cap mutual funds, which is parag parikh flexi-cap fund. This fund is constituted of 93.51% equity and equity-related assets and 6.49% of other assets. Out of the equity instruments, 22.66% are foreign equity holdings as on 8th August 2022.
At present, the large-cap holdings in the fund are around 57.52%, while 2.75% is there of mid-cap stocks and 9.71 of small-cap stocks. This asset allocation is probably due to uncertainties in the current market and around the globe.
The top holding of the fund at present is ITC Limited which constitutes 9.18% of the fund, followed by Bajaj Holdings & Investments Ltd, which constitutes 7.42% and others.
The fund has been generating an average return of around 21.42% since its inception of the fund, while the category average is 15.66%. So, you can understand how well the fund is performing. The annualised return on a 3-year basis is 26.7%, while the 5-year annualised return is 19.22%.
Costs associated with this parag parikh flexi-cap fund are an expense ratio of 0.79% and exit load. The exit load is applicable at @2% if the investor redeems 10% of the units invested in before 365 days, while a 1% exit load will be applicable if he redeems 10% of the units between 365 days to 730 days of investing.
Final thoughts
So, if you are looking for funds that can offer growth without posing a higher risk, then flexi-cap funds can be one of your options. Investing in these funds will help you earn higher returns without risking the investment portfolio too much. (buy modafinil online germany)
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