Top Performing Multi Cap Mutual Funds to Invest in 2022
In the world of mutual funds, the multi cap fund category tends to offer the maximum amount of flexibility to investors when it comes to portfolio diversification. Multi cap equity schemes can invest in stocks of varied market capitalisations. This makes them less risky than mid cap or small cap funds; however, the risk associated is higher than large-cap funds.
Investors who wish to invest in companies irrespective of their sector, theme or market capitalisation can consider investing in multi cap funds.
List of Top Performing Multi Cap Mutual Funds
You can refer to this table for the top 10 multi cap mutual funds in 2022. This list is made in descending order as per their 3-year annualised returns:
|Fund Name||3-Year Returns*|
|Quant Active Fund – Direct Plan – Growth||38.17%|
|Kotak India Growth Fund – Series IV – Direct Plan – Growth||32.61%|
|Mahindra Manulife Multi Cap Badhat Yojana – Direct Plan – Growth||28.05%|
|Edelweiss Maiden Opportunities Fund – Series I – Direct Plan – Growth||27.24%|
|Edelweiss Recently Listed IPO Fund – Direct Plan – Growth||27.24%|
|Nippon India Capital Builder Fund IV – Series B – Direct Plan – Growth||26.06%|
|Sundaram Multi Cap Fund – Direct Plan – Growth||23.23%|
|Nippon India Multi Cap Fund – Direct Plan – Growth||23.11%|
|Baroda BNP Paribas Multi Cap Fund – Direct Plan – Growth||23.09%|
|Sundaram Multi Cap Fund – Series I – Direct Plan – Growth||22.73%|
What Are Multi Cap Mutual Funds?
Multi cap funds are equity-oriented mutual fund schemes that invest their assets in stocks of companies that have different market capitalisations. These funds are also known as Diversified Equity Funds. This type of fund presents an ideal opportunity for investors who wish to have optimum exposure to different types of companies.
Unlike individual-segment funds such as large, mid and small cap funds, a multi cap fund gets to allocate its assets among companies of different market caps. Due to optimum market coverage, this fund diminishes the need for investing in various funds for diversification.
How Do Multi Cap Mutual Funds Work?
Mutual funds invest the funds gathered from investors in stocks of companies. Multi cap mutual fund is the only type of mutual fund which doesn’t have any mandate on what percentage of assets it can invest in a specific category of stock.
As per SEBI regulation, multi cap funds should invest a minimum of 75% of their assets in equity and equity-oriented securities. The fund managers can invest across all three categories of stocks as per market capitalization, with at least 25% allocation to large-cap stocks, 25% to mid-cap stocks, and another 25% to small-cap stocks.
Due to its diversity and scope for re-allocation of assets according to economic conditions, this fund holds the possibility to provide moderate returns to its investors.
Who Should Invest in Multi Cap Mutual Funds?
As multi cap funds are flexible, this can be an ideal investment instrument for many investors. Investors with the following criteria might find this fund suitable:
- Long term investment goal
Investors with long term investment goals such as retirement planning and children’s education might find investing in a multi cap equity fund fruitful. Multi cap funds tend to provide substantial returns in the long term; fund managers aim to maximise the profits by re-allocating the assets strategically from time to time. Investing in a multi cap fund for an extended period protects against inflation and reaps the benefits of compounding.
- Novice investors
A novice investor might not be aware of the risks associated with investing in stocks across varied market capitalisations. However, multi cap mutual funds balance the risk through diversification. Hence, this might be an appropriate investment option for first time investors.
- Balanced market exposure
Investors who have mild risk tolerance and want balanced market exposure might find multi cap funds perfectly suitable to their needs. This is because multi cap equities provide total market coverage and low risk through diversification of assets as per market conditions.
Benefits of Investing in Multi Cap Mutual Funds
Here are some of the benefits of investing in multi cap mutual funds:
- Investors can reap the benefits of compounding by staying invested for an extended duration.
- The portfolio is actively managed by experienced fund managers, which saves time for the investors.
- A diversified portfolio makes investment comfortable for many investors as they experience exposure across varied market capitalisations.
- Multi cap funds can even be suitable for beginners as it has the potential to generate higher returns than large cap funds with lower risk than mid cap and small cap funds.
- The flexibility of switching between large, mid and small cap allows these funds to change the portfolio composition based on the prevailing market condition.
Things to Consider Before Investing in Multi Cap Mutual Funds
If you are a potential investor and are planning to invest in multi cap funds, you should consider these factors before going ahead with any investment:
- Investment goal
As an investor, you might need to consider what you want from your investment and choose accordingly, and not the other way around. For example, multi cap mutual funds might be a suitable option for investors with long term goals, as any equity fund tends to be fruitful if invested in for the long term.
- Risk appetite
Multi cap mutual funds tend to offer low to moderate risk on investment due to a diversified portfolio. Also, it holds the potential for generating relatively higher returns than large cap funds. Hence, investors with moderate risk tolerance might find this fund comfortable for investment.
- Expense ratio
AMCs or fund houses charge a fee from their investors, known as the expense ratio. This includes the management and operational costs of the mutual fund. You should try investing in funds with a lower expense ratio, as it has an impact on the fund’s profitability.
As multi cap funds have at least 65% of their assets invested in equity-oriented instruments, they are taxed as an equity mutual fund. Here are the taxation details of a multi cap mutual fund:
|Short-term capital gain||Assets held for less than 12 months since purchase||Taxed at 15%|
Long-term capital gain
|Assets held for 12 or more months since investment and gains less than Rs. 1 lakh.||Tax-exempt|
|Assets held for 12 months or more and gains exceed Rs. 1 lakh||Taxed at 10%|
Multi cap mutual funds can be an excellent investment option for new investors as well as investors who want to explore companies across varied market capitalisations but at low risk. The fund manager’s investment objective and strategy are crucial when it comes to handling the assets of a multi cap fund efficiently. Hence, investors should thoroughly analyse whether their financial goals align with the objectives of the fund manager before investing.
FAQs about Multi Cap Mutual Funds
Can I invest in a multi cap fund through SIP?
Yes, you can invest in a multi cap fund through SIP. Investing through a systematic investment plan (SIP) will provide you with the benefit of compounding, which might significantly increase your return on investment.
How long should I stay invested in a multi cap fund?
Multi cap funds are a sub-division of equity funds. Hence, in any equity fund, you can consider staying invested for the long haul, such as 5 – 7 years. This will earn you the benefits of compounding and provide a cushion against inflation to your investments.
What is market capitalisation?
Market capitalisation is the estimation of the value of a public company. You can calculate a company’s market cap by multiplying the current price of the company’s single share with the total number of outstanding shares.
How can I choose the best multi cap fund for my investment?
Before choosing a multi cap fund to invest in, you should consider analysing what you want from your investment. After that, you should do your market research thoroughly and choose a fund which aligns with your requirements. Also, consider the fund’s historical performance and average investment cost.
Where do the multi cap mutual funds invest?
Multi cap funds invest a minimum of 75% of their assets in equity and equity-related instruments. Fund managers allocate the assets in a mixture of stocks of companies across large, mid, and small cap funds. These allocations can be modified according to the market conditions by the fund managers.