Flexi-cap vs large-cap mutual funds are one of the most popular investment options for investors who want to grow their wealth over time. Yet, mutual funds do not share identical features. There are different types of mutual funds based on various factors, such as the asset class, the investment objective, the risk profile, and the market capitalization of the underlying stocks.
Market capitalization, or market cap, is the total value of all the shares of a company in the market. It is calculated by multiplying the number of shares by the current market price of each share. Based on market cap, companies can be classified into three categories: large-cap, mid-cap, and small-cap.
Large-cap companies are those with a market cap of more than Rs. 20,000 crore. They are usually well-established, stable, and dominant in their respective sectors. They have a proven track record of performance, profitability, and governance. They exhibit lower volatility and greater resilience to market shifts. Examples of large-cap companies in India are Reliance Industries, HDFC Bank, TCS, etc.
Mid-cap companies are those with a market cap between Rs. 5,000 crore and Rs. 20,000 crore. They are usually emerging, growing, and competitive in their respective sectors. They have the potential to become large-cap companies in the future. They are more volatile and more sensitive to market conditions. Examples of mid-cap companies in India are L&T Infotech, Jubilant FoodWorks, Voltas, etc.
Small-cap companies are those with a market cap of less than Rs. 5,000 crore. They are usually new, innovative, and niche in their respective sectors. They have the possibility of delivering high returns if they succeed in their business ventures. They are highly volatile and highly risky. Examples of small-cap companies in India are Dixon Technologies, IRCTC, Affle India, etc.
What are Flexi-cap vs large-cap mutual funds?
Flexi-cap and large-cap mutual funds are two types of equity mutual funds that invest in stocks of different market caps. Equity mutual funds are mutual funds that invest primarily in the stocks of companies. They are appropriate for investors with a strong risk appetite and a long-term investment horizon.
AXIS BANK MUTUAL FUNDS👉APPLY NOW
Flexi-cap mutual funds are equity mutual funds that have the flexibility to invest in stocks of any market cap, depending on the fund manager’s discretion and market conditions. They can allocate their assets across large-cap, mid-cap, and small-cap stocks in any proportion. They aim to capture the growth potential of mid- and small-cap stocks while maintaining the stability and safety of large-cap stocks. They offer diversification, adaptability, and balance to investors. Examples of flexi-cap mutual funds in India are Parag Parikh Flexi Cap Fund, UTI Flexi Cap Fund, Kotak Flexicap Fund, etc.
Large-cap mutual funds are equity mutual funds that invest at least 80% of their assets in stocks of large-cap companies. They aim to provide consistent returns, capital appreciation, and dividend income to investors. They offer stability, reliability, and quality to investors. Examples of large-cap mutual funds in India are Axis Bluechip Fund, Mirae Asset Large Cap Fund, ICICI Prudential Bluechip Fund, etc.
Which mutual fund is better, and why?
There is no definitive answer to which mutual fund is better, as it depends on various factors, such as the investor’s risk profile, investment objective, time horizon, and market outlook. However, here are some general points to consider while choosing between flexi-cap and large-cap mutual funds:
Performance: Historically, flexi-cap mutual funds have outperformed large-cap mutual funds in terms of returns, as they have the advantage of investing in high-growth mid-cap and small-cap stocks. However, this also means that they have higher volatility and risk, as they are more exposed to market fluctuations and uncertainties. Large-cap mutual funds, on the other hand, have lower returns but also lower volatility and risk as they invest in stable and resilient large-cap stocks. Therefore, the performance of flexi-cap and large-cap mutual funds depends on the market cycle and the fund manager’s skill.
Risk: Flexi-cap mutual funds have higher risk than large-cap mutual funds, as they invest in stocks of different market caps, which have different levels of risk. Mid-cap and small-cap stocks are more prone to business failures, regulatory changes, competitive pressures, and liquidity issues. They can also witness sharp price movements due to market sentiments and speculations. Large-cap stocks, on the other hand, are more immune to these factors, as they have strong fundamentals, market leadership, and brand value. They can also withstand economic downturns and crises better than mid-cap and small-cap stocks. Therefore, the risk of flexi-cap and large-cap mutual funds depends on the investor’s risk appetite and tolerance.
Returns: Flexi-cap mutual funds have higher return potential than large-cap mutual funds, as they invest in stocks of different market caps, which have different levels of returns. Mid-cap and small-cap stocks can offer exponential returns if they succeed in their business ventures and become market leaders. They can also benefit from favourable market trends and opportunities. Large-cap stocks, on the other hand, offer moderate returns, as they have already reached a certain level of maturity and growth. They can also face saturation and competition in their sectors. Therefore, the returns of flexi-cap and large-cap mutual funds depend on the investor’s return expectations and goals.
Tax implications: Flexi-cap and large-cap mutual funds have the same tax implications, as they are both equity mutual funds. The tax treatment of equity mutual funds is as follows:
Short-term capital gains (STCG): If the investor sells the units of the equity mutual fund within one year of purchase, the gains are taxed as STCG at a flat rate of 15%.
Long-term capital gains (LTCG): If the investor sells the units of the equity mutual fund after one year of purchase, the gains are taxed as LTCG at a rate of 10%, subject to a threshold of Rs. 1 lakh per annum. Any gains above Rs. 1 lakh are taxable, while any gains below Rs. 1 lakh are exempt.
Dividend income: If the investor opts for the dividend option of the equity mutual fund, the dividend income is tax-free in the hands of the investor. However, the mutual fund house has to pay a dividend distribution tax (DDT) of 10% before distributing the dividend to the investor.
OPEN YOUR ACCOUNT PAYTM,MONEY👉CLICK HERE
What benefits come with investing in mutual funds?
Mutual funds are a popular investment option for many investors who want to diversify their portfolio, reduce their risk, and benefit from professional management. Some of the advantages of investing in mutual funds are:
Diversification: Mutual funds allow investors to invest in a variety of securities, such as stocks, bonds, and other assets, across different sectors, industries, and geographies. This helps reduce the impact of any single security or market segment on the overall performance of the portfolio.
Risk reduction: Mutual funds also help lower the risk of investing by spreading the investment across a large number of securities, which reduces the volatility and uncertainty of the returns. Moreover, mutual funds are regulated by the Securities and Exchange Board of India (SEBI), which ensures transparency, accountability, and compliance with the rules and regulations.
Professional management: Mutual funds are managed by qualified and experienced fund managers, who have the expertise and resources to research, analyze, and select the best securities for the fund. They also monitor the performance of the fund and make adjustments according to market conditions and the investment objectives of the fund.
Convenience: Mutual funds offer convenience and flexibility to investors, who can choose from a wide range of schemes and options, such as lump sum or systematic investment plan (SIP), growth or dividend option, open-ended or close-ended scheme, etc. Investors can also easily buy and sell units of mutual funds through online platforms, banks, brokers, or distributors.
Fair pricing: Mutual funds are priced according to the net asset value (NAV), which is the market value of all the securities held by the fund divided by the number of units outstanding. The NAV is calculated and declared daily, which ensures that the investors get the fair and current value of their investment.
Conclusion
Flexi-cap and large-cap mutual funds are both viable investment options for investors who want to invest in equity mutual funds. However, they have different characteristics, advantages, and disadvantages, which make them suitable for different types of investors. Therefore, the investor should choose a mutual fund that matches their risk profile, investment objective, time horizon, and market outlook. They should also do their own research, compare the performance, risk, returns, and tax implications of different mutual funds, and consult a financial advisor before making any investment decision.
BEST BOOK: MUTUAL FUNDS SIP👉BUY NOW
FAQs
Q: What is a flexi-cap mutual fund?
A flexi-cap mutual fund is an equity mutual fund that has the flexibility to invest in stocks of any market cap, depending on the fund manager’s discretion and market conditions. It can allocate its assets across large-cap, mid-cap, and small-cap stocks in any proportion. It aims to capture the growth potential of mid- and small-cap stocks while maintaining the stability and safety of large-cap stocks. It offers diversification, adaptability, and balance to investors.
Q: What is a large-cap mutual fund?
A large-cap mutual fund is an equity mutual fund that invests at least 80% of its assets in the stocks of large-cap companies. Large-cap companies are those with a market cap of more than Rs. 20,000 crore. They are usually well-established, stable, and dominant in their respective sectors. They have a proven track record of performance, profitability, and governance. They exhibit lower volatility and demonstrate increased resilience to market fluctuations. A large-cap mutual fund aims to provide consistent returns, capital appreciation, and dividend income to investors. It offers stability, reliability, and quality to investors.
Q: Which mutual fund is better: flexi-cap or large-cap?
A: There is no definitive answer to which mutual fund is better, as it depends on various factors, such as the investor’s risk profile, investment objective, time horizon, and market outlook. However, some general points to consider while choosing between flexi-cap and large-cap mutual funds are:
Performance: Flexi-cap mutual funds have higher return potential than large-cap mutual funds, as they invest in stocks of different market caps, which have different levels of growth. However, they also have higher volatility and risk, as they are more exposed to market fluctuations and uncertainties. Large-cap mutual funds, on the other hand, have lower returns but also lower volatility and risk as they invest in stable and resilient large-cap stocks. Therefore, the performance of flexi-cap and large-cap mutual funds depends on the market cycle and the fund manager’s skills.
Risk: Flexi-cap mutual funds have higher risk than large-cap mutual funds, as they invest in stocks of different market caps, which have different levels of risk. Mid-cap and small-cap stocks are more prone to business failures, regulatory changes, competitive pressures, and liquidity issues. They can also witness sharp price movements due to market sentiments and speculations. Large-cap stocks, on the other hand, are more immune to these factors, as they have strong fundamentals, market leadership, and brand value. They can also withstand economic downturns and crises better than mid-cap and small-cap stocks. Therefore, the risk of flexi-cap and large-cap mutual funds depends on the investor’s risk appetite and tolerance.
Returns: Flexi-cap mutual funds have higher return potential than large-cap mutual funds, as they invest in stocks of different market caps, which have different levels of returns. Mid-cap and small-cap stocks can offer exponential returns if they succeed in their business ventures and become market leaders. They can also benefit from favourable market trends and opportunities. Large-cap stocks, on the other hand, offer moderate returns, as they have already reached a certain level of maturity and growth. They can also face saturation and competition in their sectors. Therefore, the returns of flexi-cap and large-cap mutual funds depend on the investor’s return expectations and goals.
Tax implications: Flexi-cap and large-cap mutual funds have the same tax implications, as they are both equity mutual funds. The tax treatment of equity mutual funds is as follows:
Short-term capital gains (STCG): If the investor sells the units of the equity mutual fund within one year of purchase, the gains are taxed as STCG at a flat rate of 15%.
Long-term capital gains (LTCG): If the investor sells the units of the equity mutual fund after one year of purchase, the gains are taxed as LTCG at a rate of 10%, subject to a threshold of Rs. 1 lakh per annum. Any gains above Rs. 1 lakh are taxable, while any gains below Rs. 1 lakh are exempt.
Dividend income: If the investor opts for the dividend option of the equity mutual fund, the dividend income is tax-free in the hands of the investor. However, the mutual fund house has to pay a dividend distribution tax (DDT) of 10% before distributing the dividend to the investor.
Therefore, the investor should choose a mutual fund that matches their risk profile, investment objective, time horizon, and market outlook. They should also do their own research, compare the performance, risk, returns, and tax implications of different mutual funds, and consult a financial advisor before making any investment decision.
Q: How do I invest in flexi-cap and large-cap mutual funds?
A: There are different ways to invest in flexi-cap and large-cap mutual funds, such as:
Online platforms: There are various online platforms that allow investors to buy and sell units of mutual funds directly from the fund houses or through intermediaries. Some of the popular online platforms are [Zerodha Coin], [Groww], [Paytm Money], [ET Money], etc. These platforms offer convenience, ease of use, and transparency to investors. They also provide various features, such as SIP, STP, SWP, portfolio analysis, fund comparison, etc.
Banks: Many banks offer the facility to invest in mutual funds through their net banking or mobile banking services. Some of the banks that provide this service are [HDFC Bank], [ICICI Bank], [Axis Bank], [SBI Bank], etc. These banks act as distributors or agents of the mutual fund houses and charge a commission or fee for their services. They also provide various features, such as SIP, STP, SWP, portfolio analysis, fund comparison, etc.
Brokers: There are also brokers, or financial advisors, who help investors select and invest in mutual funds. They provide guidance, advice, and recommendations to investors based on their needs and goals. They also charge a commission, or fee, for their services. Some of the brokers or financial advisors that offer this service are [Sharekhan], [Motilal Oswal], [Angel Broking], [FundsIndia], etc.
