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What is a multi-cap fund and what are its types

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Mutual funds may allow investors to target long term financial goals like wealth creation or building a commendable retirement corpus, securing children’s financial future, etc. The best thing about mutual funds is that you do not have to invest all your investment right at the beginning of the investment cycle. All you have to do is start a Systematic Investment Plan through which you can invest small fixed sums systematically at fixed intervals till your investment objective is accomplished.

If you have a very high risk appetite and wish to invest in a portfolio of securities spread across market capitalization you can consider investing in multi-cap funds.

What is a multi-cap fund?

Equity mutual funds can be categorized based on the market capitalization which they tap into for constructing a diversified portfolio. While equity schemes like large cap, mid cap, and small cap invest in stocks of companies with large, medium, and small market capitalization respectively, a multi cap fund is an open ended scheme that diversifies its portfolio across market capitalization.

Market regulator SEBI mandates a multi cap fund to invest a minimum of 25 percent each of its total corpus in small cap, mid cap, and large cap stocks. Since the majority of the investment portfolio of a multi cap fund is exposed to the equity market, it is usually considered by investors to have very high risk tolerance.

What are the different types of multi-cap funds?

As per SEBI, there is no official sub-category for multi cap funds. However, they can be broadly classified as follows –

Large cap oriented – These multi-cap funds have more focus on large cap market and focus on bluechip stocks and then take other stocks from different market caps into consideration while constructing the portfolio.

Mid cap oriented – These multi-cap funds have more focus on the mid cap market and focus on mid cap stocks and then take other stocks from different large and small cap markets into consideration while constructing the portfolio.

Small cap oriented – These multi-cap funds have more focus on the small cap market and focus on small cap stocks and then take other stocks from mid and large cap markets into consideration while constructing the portfolio.

How to invest in a multi cap fund?

Investors can either choose the traditional way or the modern way to invest in multi cap funds. The traditional way to invest in a multi cap fund is to visit the AMC personally and fill out the KYC details and also the name of the scheme and the amount that you want to invest. If you wish to make a lumpsum investment then you need to invest the entire investment sum right at the beginning. If you wish to start a SIP then you need to fill in the SIP sum, the date of every month which you will be investing on and make sure that you manually visit the AMC every month to make the SIP investment.

The modern way to invest in a multi cap fund is by filling all the above mentioned details online by visiting AMC’s website. You can also invest online through an aggregator through their website or by any other platform made available (for example a mutual fund mobile app).

To remain invested for a longer duration consider starting a SIP in multi cap funds. Also, if you aren’t sure about how much exactly you need to invest via SIP to build the desirable corpus feel free to take the help of the online SIP calculator.

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