Glide Invest FAQ: What is the difference between multicap and flexicap funds?

What is the difference between multicap and flexicap funds?

As per the Securities and Exchange Board of India (SEBI), multicap funds are a class of equity funds that are required to invest at least 75% of their assets in equities. Additionally, they are required to allocate at least 25% towards each of small-cap, mid-cap and large-cap stocks, and this exposure towards a given market cap can go up to 50% depending on the market movements. As the minimum exposure towards all market caps is 25%, the portfolio of a multicap fund is well-diversified across market caps.

Flexicap funds are a class of equity funds that are required to invest more than 65% in equities, with no mandate for a minimum allocation towards any market cap. Flexicap funds thus have the flexibility to follow the market trends and increase their allocation towards a market cap by any extent, depending on the market movements.

Risk-averse investors would prefer investing in flexicap funds as they tend to invest more in large-cap stocks. Multicap funds can be risky as their exposure towards small-cap stocks can be anywhere between 25-50%.

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