Flexi cap funds: Overview and benefits for long-term wealth creation

Economic downturns can be intimidating, as they may significantly eat into the value of investments and leave investors in a state of uncertainty. However, seasoned investors understand that recessions are not just times of adversity, but also moments of potential opportunity. One such versatile investment avenue that makes use of this wisdom is the flexi cap fund. Here, we will understand the concept of flexi cap that aims to generate long term capital appreciation. Table of contents Flexi cap funds – The overview Benefits of flexi cap funds in your investment portfolio Why trust Bajaj Finserv Flexi Cap Fund for potential wealth creation Comparison between flexi-cap funds with other equity categories Who should invest in flexi cap funds? FAQs funds, explore their benefits, compare them with other equity categories, and assess their suitability for various investors over the long term. We will also check out the Bajaj Finserv Flexi Cap Fund – our recently launched product that aims to generate long term capital appreciation.

Table of contents Flexi cap funds –

• Flexi cap funds – The overview
• Benefits of flexi cap funds in your investment portfolio
• Why trust Bajaj Finserv Flexi Cap Fund for potential wealth creation
• Comparison between flexi-cap funds with other equity categories
• Who should invest in flexi cap funds?
• Factors to consider while investing in flexi cap funds
• Taxation of flexi cap funds

Flexi cap funds – The overview

Flexi cap funds are a type of mutual funds that offer investors the flexibility to invest across the entire market capitalisation spectrum. This means that fund managers have the freedom to allocate funds to large-cap, mid-cap, and small-cap stocks based on prevailing market conditions and their outlook on various sectors. Unlike specific equity categories – such as large-cap, mid-cap funds, or small-cap – flexi cap funds do not have any rigid allocation limits. This flexibility allows them to adjust their portfolios dynamically and capitalize on emerging opportunities, while effectively managing the risk factors.

Benefits of flexi cap funds in your investment portfolio

Adaptability to market conditions: One of the main advantages of flexi cap funds is their adaptability to changing market dynamics. Flexi cap offers mandate to the fund manager to allocate the equities in the large, mid, and small cap space based on the market dynamics. Fund managers, using their research and analytics, have the flexibility to restructure the portfolio aligning to the market conditions. Diversification: Flexi cap funds provide diversification by investing across various market capitalisations and sectors. Active management: The performance of flexi cap funds depends on the skills and experiences of fund managers. These managers actively monitor market trends, economic indicators, and corporate performances. Long-term wealth creation: Flexi cap funds are tailored for long-term wealth creation. These funds have the potential to deliver relatively better returns over extended investment horizons.

Why trust Bajaj Finserv Flexi Cap Fund for potential wealth creation

Investing to grow wealth can be both challenging and a valuable learning experience. Fortunately, the thriving Indian market offers numerous opportunities for savvy investors. The Bajaj Finserv Flexi Cap Fund adopts a strategic megatrend investing approach, targeting long-term growth by investing in companies well-positioned to capitalise on significant global trends. These megatrends encompass high-growth sectors like digitisation, technological advancements, healthcare, consumerism, and urbanization. The fund takes a flexible asset allocation approach, which enhances its ability to tap into the potential of these megatrends. In essence, the Bajaj Finserv Flexi Cap Fund offers investors exposure to the potential growth industries of the future. However, it is always advisable to consult a financial expert before making any investment decisions.

Comparison between flexi-cap funds with other equity categories

Large-cap funds: Large-cap funds primarily invest in well-established large cap companies with stable revenues and significant market capitalisation. As per SEBI circular dated 6th October 2017, the top hundred companies in terms of market capitalization are classified as large cap companies. While large cap funds offer relative stability, their growth potential may be limited during economic upturns. Flexi cap funds, on the other hand, have the freedom to invest in companies of any size, allowing them to seize growth opportunities across the board.
Mid-cap funds: Mid-cap funds focus on investing in mid-sized companies with higher growth potential but also come with higher volatility. Companies between 101 and 250 in terms of market capitalization are classified as mid cap companies. Flexi cap funds can include mid-cap stocks in their portfolio when the market conditions favour such investments, thereby providing a dynamic approach to capture growth without compromising on stability.
Small-cap funds: Small-cap funds invest in smaller companies with the potential for rapid growth, but they can be highly susceptible to market downturns. Companies from 251st position onwards, in terms of market caps are small cap funds. Flexi cap funds can tactically allocate funds to small-cap stocks during bullish phases while reducing exposure during uncertain times, offering a balanced approach to risk management.

Who should invest in flexi cap funds?

Diversification seekers: Investors who want exposure to a diversified portfolio of stocks across different market capitalisations and sectors can consider flexi cap funds. Long-term investors: Investors who have a long-term horizon and are looking for wealth creation with flexi cap fund in the long term. Investors with limited knowledge: Investors who may not have the expertise or time to analyse individual stocks can opt for flexi cap funds. Conclusion Flexi cap funds can offer investors the freedom to withstand market ups and downs strategically. While no investment comes without risks, the versatility and adaptability of flexi cap funds make them a compelling option for investors seeking to build wealth in the long run. However, before investing, it is crucial to conduct thorough research, understand your risk tolerance, and align your investment goals with the fund's objectives.

Factors to consider while investing in flexi-cap funds

Investors may evaluate the following factors before investing in flexi-cap funds:

Investment horizon: Since flexi-cap funds fall under equity investments, they are generally more suitable for those with a long-term perspective, typically five years or more. A longer holding period allows the fund manager’s strategy to unfold and helps mitigate the impact of market fluctuations. Through compounding, a longer horizon also enhances growth potential.

High risk tolerance: These funds allocate investments across different market capitalizations, including mid and small-cap stocks, which tend to be more volatile than large-cap stocks. Investors should be prepared for volatility, especially in the short term.

Fund manager’s expertise: The success of a flexi-cap fund depends largely on the fund manager’s ability to identify and invest in promising companies. Reviewing the fund manager’s past performance and investment approach can be helpful before investing.

Portfolio diversification: Including a flexi-cap fund in an investment portfolio can contribute to diversification. Investors should evaluate how it aligns with their broader asset allocation and overall financial strategy.

Investment objective: It is important to ensure that the fund’s investment goal aligns with personal financial objectives. Since flexi-cap funds are typically focused on long-term growth, they may be suitable for those looking for capital appreciation potential over an extended period.

Taxation of flexi-cap funds

Flexi-cap funds, classified as equity-oriented mutual funds, are subject to specific tax rules in India.

Capital gains tax: The key tax implication for flexi-cap funds is related to capital gains. When investors sell their fund units at a profit, the gains are subject to taxation.

Long-term capital gains (LTCG): Gains from units held for more than one year are categorized as long-term capital gains. These are taxed at 12.5% (without indexation benefit) on total gains exceeding Rs 1.25 lakh in a financial year.

Short-term capital gains (STCG): Gains from units sold within one year fall under short-term capital gains and are taxed at 20%.

FAQs:

Can I invest in flexi cap fund through SIP or is it better to opt for lumpsum investment?

Both these options have their own set of merits. SIP can average out the cost over time and potentially reduce the impact of market volatility. A lumpsum investment can benefit from immediate market exposure. It is better to assess one’s financial goals and risk appetite to make an appropriate choice.

How does the flexibility of Flexi Cap Fund benefit me as an investor in the long run?

The flexibility of this fund allows the fund manager to allocate investments based on the volatility of the market. This means the fund manager can tap into opportunities across sectors. This leads to a potential for better returns over long term at commensurate risk.

What makes the Flexi Cap Fund from Bajaj Finserv AMC unique?

There are various factors which makes Bajaj Finserv Flexi Cap Fund unique:

• It is true to the label flexi cap fund.
• Rather than ‘going with the flow,’ it invests in Megatrends by anticipating the flow.
• It embraces long-term trends: with potential high active share component.
• It targets future profit pool companies.
• It has a relatively low turnover ratio.

How do flexi cap funds differ from Large Cap, Mid Cap, and Small Cap Funds?

Flexi-cap funds invest across market capitalizations (large, mid, and small), offering flexibility to the fund manager. Large-cap funds focus on established companies, mid-cap on growing companies, and small-cap on smaller companies. Flexi-cap funds can potentially capture growth across the market capitalisation spectrum, unlike funds restricted to specific market caps.

What are the key benefits of investing in a flexi cap fund?

Flexi cap funds offer diversification across market caps, potentially mitigating risk compared to single-market-cap funds. They allow fund managers to dynamically adjust asset allocation based on market conditions, potentially enhancing returns. This flexibility can be beneficial in varying market cycles.

How does the Bajaj Finserv Flexi Cap Fund help in wealth creation?

The Bajaj Finserv Flexi Cap Fund invests across market caps, potentially participating in the growth of various companies. This diversification can be beneficial for long-term wealth creation. However, like all equity investments, it carries market risk. Returns are not guaranteed and depend on market conditions.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.