Multicap mutual fund schemes gain currency in 2017

Finally, multicap mutual fund schemes are getting their due. There was a time when every mutual fund investor used to own units of a multicap scheme. Mutual fund advisor used to reason that if a person is holding just one mutual fund scheme, it better be a multicap scheme. However, slowly these funds lost their relevance as laregecap, midcap and smallcap schemes gained more popularity among investors. This trend was finally reversed in 2017. Mutual fund advisors once again started strongly recommending multicap schemes during the year.

Blame it on demonetization or relentless campaigns like ‘mutual fund sahi hai’, many new investors are getting into mutual funds like never before. However, many of them have their eyes set on the returns posted by schemes in the past year. They have been pestering advisors that they would like to invest in small and midcap schemes for better returns. The risk-conscious investors, on the other, want to play it safe with largecap mutual fund schemes.

Against this backdrop, many mutual fund advisors have started asking investors to bet on multicap schemes or diversified equity schemes that invest across stocks in different market capitalisations. They have been educating investors that betting on schemes on the basis of past returns is futile. Since there is no way one can predict accurately the movement of the stock market, there is no point on betting on a scheme that will bet only on a market cap, advisors say. A better way, they argue, would be to bet on a scheme with the freedom to invest across market capitalisations and sectors.


Simply put, invest in multicap schemes to benefit from an upturn in any of the market capitalisations. This is not possible if you invest in a scheme with a mandate to invest mostly in stocks in a particular market capitalisation. For example, a smallcap scheme may continue to invest mostly in smallcap even when the fortunes of the smallcap segment are waning and largecap stocks are shooting up. In comparison, a multicap fund manager can swiftly start switching to largecap in such a scenario.

However, this doesn't mean that you should blindly bet on multicap, irrespective of your goals, investment horizon and risk profile. Those basic parameters don't change. If you have a moderate risk profile, you can bet on a multicap scheme to achieve your long-term goals. More so, if you are investing a modest sum. Instead of trying to diversify your holdings across diverse schemes, you can effectively bet on a multicap scheme.