Independent of the market cycle, investing in a multi-cap fund enables you to access all market segments. The fund's large-cap segment offers stability at a relatively moderate risk. The small-cap element typically improves portfolio performance over the long-term, while the mid-cap offers a combination of growth and stability. For long-term investors looking to accumulate wealth and achieve their financial objectives with a potentially better risk-return trade off, multi-cap fund offers a strong case. These investors should have an optimal investing horizon of roughly five years to get a fair taste of the market.
Multi-cap funds outperform large and mid-cap funds in terms of diversification by investing in more stocks. However, large and mid-cap funds can include higher-quality equities than their multi-cap equivalents, meaning that investors in the former will see better returns.
While a flexi-cap fund is a form of equity fund that covers stocks from multiple sectors and market capitalisation, a multi-cap fund invests in diverse market-cap businesses that include large-cap, mid-cap, and small-cap stocks but they mostly invest in large-size stocks making it less hazardous.
Use the Bajaj Finance SIP calculator to get an approximate understanding of the kind of returns you might expect from these funds before making a decision.