October 18, 2021


What are Multicap mutual funds and why are they important

When it comes to mutual fund investments, many investors might face some challenging questions that need to be answered. Investors are often plagued by the thought of whether they should opt for low cap schemes for aggressive growth or opt for stability via large-cap mutual fund investments. To invest in mutual funds, it is a primary requirement to have a fair knowledge of the different types of mutual funds.

What is a Multicap mutual fund?

One of the strongest aspects that fuels your investment strategy is risk tolerance. It keeps on fluctuating with time and circumstances. This results in a mutual fund investment dilemma as small, medium, or large-cap mutual funds may or may not be in sync with it.

Let us look at the meaning of a Multicap fund:

  • It can be said that it is a hybrid form of investment
  • Multicap mutual fund invests in a mixed portfolio of equity-related stocks of companies and equity with a range of market capitalizations
  • Several types of schemes can be found wherein mutual fund investments have been made in small-cap, mid-cap, and large-cap companies
  • This could this category of investment suitable to align with your risk tolerance
  • Individually, if you choose to invest your corpus in either of small, mid-cap, or large-cap funds, there is a restriction limited by how the portfolio is defined
  • This simply means a fund manager of a medium cap fund cannot invest in mutual funds of small-cap funds, which makes a multicap fund more lucrative as it offers flexibility

What are the types of multicap funds?

Ones the focus on large-cap stocks:

The primary objective is to build and expand a portfolio by making mutual fund investments in large-cap segments. Once satisfactory returns are derived, opportunities in small and mid-cap segments are explored.

Ones that focus on small/mid-cap stocks:

Here the mindset of investments in mid-cap and small-cap segments is quite aggressive. Only in case of a downside, investments in large-cap funds are looked upon for protection. The idea is not to focus on the market capitalizations before investing but to choose stocks that have the ability to outperform.

Advantages of investing in Multicap funds:


  • Multicap funds offer a diverse range of portfolio investment opportunities. This tends to help mitigate risks
  • Spreading out investments across a range of funds helps to keep a better track of returns

Vast Exposure:

  • Fund managers offer a vast exposure as investments are not restricted to any particular business sector, but it is about different key sectors that are the driving force of the economy
  • Investors gain insightful knowledge of several business models and this experience helps them to further advance their profile and make the most out of it

Mutual fund investments to build a good portfolio based on current market conditions:

  • The experience and expert advice received by investors is a composition of small-, mid-, and large-cap funds that are thriving in current conditions
  • If the portfolio manager analyses that small-cap stocks may get overvalued and there is a possibility of a huge shift in that space, they might turn to large-cap funds and settle at a defensive position

Hence, the volatility in Multicap funds helps investors to brace for market conditions and face the circumstances head-on. This method allows them to have critical and in-depth thinking abilities. It allows them to enjoy returns close to their desires and needs.

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