Best multi cap mutual funds to invest in 2019

Many mutual fund managers and advisors have started strongly recommending these schemes after the recent re-categorisation exercise by Sebi.

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Here's the monthly update on our recommended multi cap mutual funds to invest in 2019. There is no change in the recommendations this month. Last month, we had added one scheme - ICICI Prudential Multicap Fund to the list. The multi cap category on an average has given 13.96 per cent and 15.16 per cent in three- and five-year period respectively.

Many mutual fund managers and advisors have started strongly recommending these schemes after the recent re-categorisation exercise by Sebi. These mutual fund participants believe that multicap schemes are uniquely placed to benefit from the new Sebi guidelines in the coming days.

As per the new investment mandate, these schemes can invest across market capitalisations and sectors based on the view of the fund manager. Sebi has put in place a strict investment mandate for different categories of mutual funds. The new guidelines are likely to have an impact on the performance of some schemes as the fund manager no longer will be able to deviate from the original mandate to make extra returns based on the market sentiment.


Coming back to multi cap mutual fund schemes, these schemes are typically recommended to equity investors with a moderate risk appetite. As said before, these schemes can invest across market capitalisations and sectors. This mandate offers the fund manager the freedom to switch to sectors and stocks belonging to any market capitalisation based on his views on the market or their prospects.

However, these schemes are meant for investors with a moderate risk appetite. Since these schemes may also invest in mid or small cap stocks, they are riskier than large cap schemes that invest predominantly in very large companies. However, because of this exposure to mid and small cap stocks, multi cap mutual fund schemes may also offer higher returns.

In short, if you are an investor with moderate risk profile and looking to invest for at least five to seven years to meet a long-term financial goal, you should consider investing mostly in multi cap mutual fund schemes. If you want to diversify and reduce the overall risk on the portfolio, you may also invest in large cap schemes or aggressive hybrid schemes.

If you are a moderate risk-taker looking to diversify your mutual fund portfolio, you may read: Best large cap schemes to invest in 2019.
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If you want to invest in a multi cap scheme, but do not know who to choose the right scheme, here are our pick. We have handpicked some schemes for you. Invest in these schemes with an investment horizon of five to seven years to achieve your long-term financial goals like your retirement and child's higher education.

We would also update the list every month so that you would know how the scheme is performing.

Best multi cap schemes to invest in 2019
Mirae Asset India Equity Fund
Motilal Oswal Multicap 35 Fund
SBI Magnum Multicap Fund
Kotak Standard Multicap Fund
Aditya Birla Sun Life Equity Fund
ICICI Prudential Multicap Fund

Here is our methodology:
ET.com Mutual Funds has employed the following parameters for shortlisting the equity mutual fund schemes.
1. Mean rolling returns: Rolled daily for the last three years.
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2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.
i) When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.
ii) When H is less than 0.5, the series is said to be mean reverting.
iii) When H is greater than 0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series
3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.
X =Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z
4. Outperformance: It is measured by Jensen's Alpha for the last three years. Jensen's Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). Higher Alpha indicates that the portfolio performance has outstripped the returns predicted by the market.
Average returns generated by the MF Scheme =
[Risk Free Rate + Beta of the MF Scheme * {(Average return of the index - Risk Free Rate}
5. Asset size: For Equity funds, the threshold asset size is Rs 50 crore
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