Equity markets, which consist of stocks, are constantly changing, and not all stocks move in the same direction. Stocks with a high market capitalization are sometimes popular. In contrast, mid or medium-sized (with medium or small-market capitalization) may be in demand at other times. Elite stocks, considered safe investments, do not offer the highest returns, and stocks from the neighboring market could outperform them.
Challenges in Choosing a Market Segment for Investment
Choosing which market to invest in can take time because many options exist. For instance, an index fund may only focus on the Sensex or Nifty Next 50. In addition, a prominent fund will primarily invest in large companies, while a midcap fund will have at least 60% of its assets invested in mid-size or small entities, respectively.
Most categories of equity mutual funds are restricted by their names and must follow specific investment guidelines. However, flexicap funds are mutual funds that offer flexibility in terms of investment. This statement means they can invest in companies across various market capitalizations without being restricted to a specific category of stocks.
The relevance of flexicap funds lies in the fact that flexibility is an essential factor in investing and can help maximize returns. In addition, by being able to invest in a range of companies, flexicap funds can adapt to changing market conditions and generate higher returns compared to funds that are limited to specific market capitalizations.
The Popularity of Flexicap Funds
Flexicap funds are helpful when you need to invest across markets. These funds can invest in a wide range of companies, providing diversification and the potential to benefit from various market cycles. In addition, because flexicap funds do not rely on rules on how much they can invest in large, mid, or small companies, they are the most flexible type of mutual fund.
Due to their versatility and ability to adapt to changing market conditions, flexicap funds have gained popularity among investors. They are the second-largest equity fund category after the large-cap funds. Flexicap funds are popular because they offer flexibility and adaptability in their investment approach.
These funds can change their weighting across different categories without regulatory limits, which allows them to be dynamic and capitalize on changing market conditions. This flexibility can be beneficial in times of uncertainty, such as during the COVID-19 pandemic, when various geopolitical and economic factors are at play.
The factory flexibility of flexicap funds can help investors navigate these challenges and maximize returns. When choosing a flexicap fund, it is essential to consider several factors. Working with a financial consultant can help you select a fund that meets your specific needs and preferences.
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