Mutual funds are considered to be one of the best investment tools for those who are looking to earn good returns. Traditionally, a lot of people invested their savings in investment avenues such as fixed deposits. However, with rising inflation, the need for better returns is much more, which is why exploring the world of mutual funds has become an essential move for those who are looking to secure their financial safety.
Now, which are the best mutual funds to invest in? Choosing between large-cap, mid-cap, or small-cap funds would depend on each investor’s investment goals and risk appetite. While investing in large-cap funds can help stabilize one’s portfolio, mid-cap funds can benefit investors from their growth potential. Those who have a high-risk appetite can opt for small-cap funds, as these funds can offer higher returns but at the same time involve higher risk too.
Now, those who are looking to diversify their portfolio can choose to invest in multi-cap funds. Multi-cap funds are diversified equity funds that invest in large-cap, mid-cap, and small-cap funds. Take a look at how investing in multi-cap mutual funds can be beneficial:
- These funds help with establishing a diversified portfolio
One of the key advantages of multi-cap mutual funds is the benefit of diversification. Since multi-cap mutual funds invest in companies in various market sectors, the fund manages to provide a natural diversification to the investor’s portfolio. The investor does not have to choose between large-cap, mid-cap, and small cap-companies as the fund gives exposure to all of them.
- Investors can rely on the expertise of professional management
Questions such as how to invest in mutual funds and which is the best mutual fund to invest in can prove to be quite confusing for a first-time investor. This is why multi-cap mutual funds can be a sound option to choose as these funds rely on the expertise of a fund manager when it comes to their performance. A fund manager is responsible for allocating the invested funds, where they use their experience to take advantage of the market conditions for optimizing investments to get the best returns possible.
- Multi-cap funds offer better risk-adjusted returns
With the diversification of funds, it becomes much easier to stabilize the risk. For example, if small-cap companies are not doing well during a certain phase, a fund manager can shift focus to other large-cap companies, thereby effectively managing the fund allocation for optimum returns.
- These funds are open-ended equity investments
Multi-cap funds, like all other mutual funds, are highly liquid investments. These funds are open-ended equity investments, which means that an investor can choose to sell them at any time to recover their money. There is no inclusion of a lock-in period in multi-cap mutual funds.
Multi-cap mutual funds are one of the best mutual funds to invest in for long-term inflation-beating returns. For those who are first-time investors looking to diversify their portfolios, investing in multi-cap mutual funds can be a great option to consider!
Reference links:
https://www.icicidirect.com/knowledge-center/article/benefits-of-investing-in-multi-cap-funds
