A Diversified Multi Cap Funds is an investment vehicle that invests In different companies irrespective of their market capitalization.It is a well-known fact that mutual funds are known for their ability of wealth creation. Mutual funds come in many categories such equity funds, debt funds, index funds, fixed income funds, balanced funds and so on. Mutual funds are also classified as large-cap funds, mid-cap funds and small-cap funds based on their market capitalization. A diversified funds is an instrument that invests across market caps with at least 65% exposure to equity and equity related instruments.
What are diversified multi-cap funds?
A diversified multi-cap fund is an investment vehicle that invests In different companies irrespective of their market capitalization. The diversification helps in maximizing gain for the investors and minimizes the risk involved in the investing of mutual funds. The fund manager of these funds has an advantage over the other categories of mutual funds as the fund manager has the flexibility to build the portfolio by current and future return potential.
How do diversified multi cap funds work?
- Banking and Finance,
- Oil and Gas,
- Pharmaceuticals and so on.
Diversified multi cap funds are introduced with an intent to provide the benefit of the best investment plan which helps the investor to gain profit from all sectors of the economy irrespective of their size or product. However, every diversified multi cap funds comes with their own investment guidelines which vary from company to company.
Advantages of diversified multi cap funds:
Diversified multi cap funds offer many benefits such as,
- It provides diversification across Companies which are at different life stages
- moreover, it reduces the need for keeping track of different mutual funds in the portfolio.
- Diversified funds are professionally managed by a fund manager who has years of experience in financial planning and fund management. It is challenging for an individual to record and analyse the market constantly and helps you in a better mutual funds investment with tax savings.
- A multi-cap Fund manager can deliver superior returns as he has the flexibility to modify the portfolio based on market trends. For example, he may allocate a large corpus towards mid & small cap companies in a bull market and change that to large Cap companies if he predicts a bear market.
- It provides a certain degree of stability to the portfolio as it includes funds of all sector and sizes.
Who should invest in diversified multi cap fund:
The diversified multi cap funds are one of the best investment options for investors who are not certain about the risk tolerance level and for entry-level investors. It is also a suitable option for investors looking for wealth management by investing in a diversified portfolio across market-cap and sectors.
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