In essence, Flexi-cap funds have no restrictions on the market capitalization of the stocks in which they can invest. While large-cap funds invest primarily in blue-chip stocks, and the same goes for mid-cap funds and small-cap funds, Flexi-cap funds can change their asset allocation policies by moving between the three market caps as they deem appropriate.
Flexi-cap funds operate on the assumption that they can capitalize on appealing investment possibilities across market segments through a fluid investment style. If, on the other hand, stocks from a particular segment become unattractive, the fund manager may transfer the corpus to an alternative segment. Thus theoretically, Flexi-cap funds can provide the best of both worlds–an opportunity to take advantage of the’ hottest’ segment and a provision to leave an unattractive segment.
BREAKING DOWN Flexi-Cap Fund
In contrast to other funds, such as mid-cap or small-cap funds, size is not a restriction on Flexi-cap funds. A Flexi- cap fund can invest in any business irrespective of the size of the companies.
Flexi-Cap and Market Capitalization
Flexi-cap and market capitalization is among the most popular ways in which mutual funds select companies to invest in. Market capitalization relates to the total market value of the outstanding shares of a company in the USD. Commonly known as “market cap,” it is calculated by multiplying the exceptional stocks of a company by one share’s present market price.
Using market capitalization to demonstrate a company’s size is essential because the size of a firm is a fundamental determinant of multiple features that interest investors, including danger.
Large-cap companies usually have $10 billion or more in market capitalization. Usually, these major corporations have been around for a long moment and are significant players in well-established sectors. Investing in large-cap businesses does not often yield enormous returns in a short period, but these companies usually reward investors with a steady rise in share value and dividend payments over the long run.
Mid-cap companies usually have between $2 billion and $10 billion in market capitalization. Mid-cap undertakings are growing. They carry inherently increased risk than large-cap companies because they are not as well established, but appealing to their potential for development.
Small-cap companies with between $300 million and $2 billion in market capitalization. These small companies may be young and/or may serve niche markets and new sectors. Because of their lifespan, the markets they serve, and their size, these firms are regarded to be more considerable risk investments. Smaller businesses are more vulnerable to financial slowdowns with fewer resources.
Flexi-cap fund example
The All-Cap Fund for the Fidelity Stock Selector is a diverse approach for domestic equity that invests widely across all industries, market capitalizations and styles. Two members of the Global Asset Allocation division of Fidelity and a team of portfolio executives manage the fund. The weightings of the portfolio industry are comparable to those of its benchmark in an attempt to add value through active stock choice and also to reduce the hazards connected with industry or market timing.