Amidst elevated valuations in small- and mid-cap stocks, investing in flexi-cap funds can provide a balanced approach to manage risks. As fund managers invest across large-, mid- and small-cap stocks without any restriction, such funds earn higher returns in the long-run and are ideal for core allocation.
Fund managers adjust allocations dynamically based on the market conditions. As a result, they can capitalise on changing market trends and valuations without the need to time the valuation. The diversification also helps spread risk, as different segments of the market may perform differently under diverse market conditions.
However, before investing in a flexi-cap fund investors should assess the fund’s performance across different market cycles. They should consider the track record of the fund manager on how successfully he has played a cycle and generated alpha over the benchmark or peers. Top performing funds such as Quant Flexicap, JM Flexicap and Bank of India Flexicap have given over 50% returns in a one-year period. Over a two-year period, these funds have given returns of over 25%.
Nirav Karkera, head, Research, Fisdom, says flexi-cap fund investors can gradually transition…
