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Top Benefits of Investing in Multi Cap Funds


Multi cap mutual funds invest across stocks of companies with large, mid and small market capitalizations to build a diversified equity portfolio. By strategically allocating capital to companies across the market cap spectrum, the multi cap fund aims to benefit from the higher growth potential typically offered by mid and small cap stocks as well as the stability and lower volatility normally associated with large cap stocks. Multi cap funds provide instant diversification and exposure across segments in a single fund. Here are 5 top benefits of investing in multi cap mutual funds for retail equity investors looking for a diversified long-term portfolio:

1. Diversification Across Market Caps

A key benefit of multi cap funds is diversification across market capitalizations. Large caps provide stability while mid and small caps provide higher growth potential. Blending all three in varying proportions creates a diversified portfolio. This ensures you don’t miss out on good opportunities across market caps.

2. Managed Volatility

Multi cap funds tend to exhibit lower volatility compared to pure mid cap and small cap funds. The presence of large cap stocks helps balance the volatility induced by mid and small caps. This leads to relatively more stable returns in multi cap funds.

3. Long Term Wealth Creation 

Multi cap funds aim to generate long term wealth creation. The fund manager dynamically shifts allocation between large, mid and small caps based on prevailing valuations and growth opportunities. This provides healthy exposure to companies with growth potential and stability. The power of compounding across market caps can create sizeable wealth over long periods.

4. Low-Cost Diversified Investment

Multi cap funds provide retail investors with a relatively low-cost way to invest across large, mid and small cap stocks to create a diversified equity portfolio. Through a single multi cap fund investment, investors can build exposure to a wide variety of sectors and companies across market capitalizations and styles. This convenient single fund approach avoids the need for investors to build and monitor individual portfolios comprising of separate large cap, mid cap and small cap funds. A multi cap fund serves as a readymade diversified equity solution.

5. Professional Fund Management

Multi cap funds are actively managed by professional fund managers. The fund manager and research team evaluate opportunities across market caps to construct a well-balanced portfolio. Equity research skills and experience of the fund house contributes to informed stock selection and portfolio construction for potential growth.


While investing in be sure to choose funds that have experienced and skilled fund management teams with a consistent long term track record across different market cycles. Avoid funds with very high portfolio churn as that indicates lack of conviction. The online sip calculator helps to track portfolio profits  online  and  Invest regularly through Systematic Investment Plans to benefit from rupee cost averaging and compounding. Overall, Multi Cap Fund can offer an attractive blend of diversification, growth potential and stability for long term retail equity investors looking for a consolidated single fund solution for their core portfolio.

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