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Want to invest in multi-cap schemes? Things you must know

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Want to invest in multi-cap schemes? Things you must know
May 13, 2023

As responsible investors, you must have a clear understanding of where exactly you will invest and must know the pros as well as cons of doing so. A mistake that regular investors commonly make is that they often opt for higher returns that can offer short-term gains. This is especially suited for high-risk category of investors, who wish to earn sizeable dividends in a short span of time. However, before investing your money in any option, you must make sure that the returns meet your requirements as well as your risk-appetite. This is because any scheme that yields optimum returns over a period of time is generally the surest way of gaining a credible corpus. One such option these days is investment in mutual funds, which in actuality is an inclusive decision given the fact that there are mutual fund advisors and managers whose expertise helps you in managing your fund options properly so that optimum returns can be generated. There are a lot of options where you or your fund manager can chose to place the funds so that sufficient returns can be generated over a period of time. These options come in the form of equity, or debt or mixed fund options. When the mode of investment is stock, generally there are three types of stock fund options. These are:

  1. Large cap stocks:

    These are the stocks that are listed by the top corporate companies and offer a low-risk and high-credibility option. The main benefit of investing in such stocks is that the returns are guaranteed and the invested funds are rather safe. This is because the companies are renowned and there is no risk of any of market-based fluctuations associated with these stocks. However, the limitation is that the returns may not be as high as desired.

  2. Mid-cap stocks:

    These are the stocks that are listed by tier-2 or one-ladder below companies. These stock values are not as high as that of large-cap ones and are not as low as that of small-cap ones. These stocks offer better growth rates than large-cap stocks and the risk-factor is also a bit higher.

  3. Small-cap stocks:

    These are the stocks that are listed by small or new companies. The risk-factor associated with investment in small-cap funds is quite high. However, the projected returns are also higher than either large-cap or mid-cap stocks.

This is where the importance of multi-cap schemes comes in. Multi-cap schemes are schemes that offer a broader and a more diverse range of investment. Actually, diversity of investment is a very important parameter that implies investment in core options across fund-options. In simpler terms, this means that the returns that will be generated on your investment will not be tied to any particular option but will be balanced by generated profit in other options. Therefore, even if one stock option does not perform well-enough, you will still be able to balance the returns by earning secured returns from another, low-risk fund-option. Thus, investing in multi-cap schemes funds allows you to enjoy the benefit of optimum returns in the long run.

HDFC Life offers HDFC Life Click 2 Wealth - a unit -linked plan that offers market-generated returns and helps you achieve financial stability over a period of time.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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