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%.
Why should you invest in index funds?
Low Cost: Since index funds are passively managed, the total expense ratio (TER) is very less as compared to the actively managed ones. While an actively managed fund may charge you anything between 1-2% as TER, an index fund would typically charge ...
Who manages Index Funds?
Just like actively managed mutual funds, index funds are also managed by fund managers. But fund managers have a little role to play, because constituents of index funds seldom change. Managers just buy and hold all the securities of a particular ...
Why should you not invest in index funds?
Index funds are built to replicate the index and most active fund managers charge fees to outperform indexes. Therefore, an investor who is purely looking to do better than the index should not invest in index funds. It’s important to point out that ...
Why are index funds popular in other parts of the world?
Index funds are considered as ideal for constructing a core portfolio for long term wealth creation due to their diversification benefits, low cost and low portfolio churn. Globally, Index funds are popular due to the following reasons – Easy - Index ...
Are all index funds the same?
All index funds are not same because different index funds track different indices. But the philosophy behind investing remains the same. There are different types of indices in India: Benchmark indices like BSE Sensex and NSE Nifty Sectoral indices ...