Midcaps vs. multi-caps vs. flexi-caps: Which is the right fund for you?

A mid-cap fund is an equity scheme that primarily invests in mid-sized companies. As per SEBI (Securities and Exchange Board of India) circular on Categorization and Rationalisation of Mutual Fund schemes dt October 06, 2017, at least 65% of the fund’s money must be invested in shares of mid-cap companies that fall between the 101st and 250th rank in the stock market (in terms of full market capitalisation).

They may be suited for investors who are prepared to take “ very high risk” and stay invested for the long term. Potentially, mid-cap funds aim for  higher returns than large-cap funds, but they also carry more risk and are  also relatively more volatile than large cap funds.

At the same time, they may  be relatively less risky than small-cap funds (which invest in small companies ranked 250 and below).

A multi-cap mutual fund is another equity scheme that invests in companies of all sizes:

• Large-cap

• Mid-cap

• Small-cap

It does not focus on any one category, and instead spreads its money across all three. As per SEBI rules, at least 75% of the fund’s total money must be invested in equity & equity related instruments. Now, out of this, a minimum of 25% each must go into large-cap, mid-cap, and small-cap companies. The remaining 25% can be invested wherever the fund manager sees potential.

Yes, the multi-cap fund can stay diversified across all segments. By investing across all company sizes, the scheme seeks to reduce the risk of being overexposed to just one sector. For more clarity, let’s study the relevance of such 25% allocation:

Multi-cap funds may be suitable for investors who:

• Want diversification across company sizes in a single fund.

• Have a long-term horizon to handle market fluctuations. 

• Can take  very high risk

Be aware that these schemes may not be ideal for conservative investors, as part of the portfolio will always be in small and mid-cap stocks.

A flexi-cap mutual fund is  an equity scheme that can invest in companies of any size: large-cap, mid-cap, or small-cap. As per SEBI, at least 65% of the fund’s assets must be invested in equity and equity-related instruments. 

These schemes are different from multi-cap funds and have no fixed rule on how much allocation must go into each category. The fund manager has complete freedom to decide the allocation.

They make “dynamic allocations”. The fund manager may shift money between large, mid, and small companies depending on market conditions and available opportunities. 

For example, let’s say large-caps look relatively less volatile in a recessionary market. Now, the fund may increase its allocation there.

Flexi-cap funds are suitable for investors who:

• Don’t want to time the market.

• Prefer to give the allocation decision to a professional fund manager instead of making it themselves.

• Have a long-term horizon to ride out market volatility.

• Can handle very high risk, as the portfolio may tilt more toward mid and small companies at times.

Once you decide which type of equity scheme to invest in, you can consider multiple options offered in each category by Tata Mutual Fund™  . You can start investing through a SIP from ₹100/150  or a lump sum of ₹5,000. 

Each scheme also provides multiple plan options, including Growth and IDCW (Income Distribution Cum Capital Withdrawal), and is available in both Regular and Direct plans. 

Let’s check out some mutual fund schemes you can consider for investing in 2025:

(An open-ended equity scheme predominantly investing in mid-cap stocks)

Tata Mid-Cap Fund is an equity mutual fund that primarily invests in mid-sized companies. The fund’s investments may be focused on mid-cap stocks, which are companies ranked between 101st and 250th in terms of full market capitalisation.

The investment objective of this scheme is to provide income distribution and / or medium to long term capital gains. Investment would be focused towards mid cap stocks.

However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The scheme does not assure or guarantee any returns

Furthermore, for measuring performance, the fund uses the Nifty Midcap 150 Total Return Index (TRI) as its benchmark. This index tracks the performance of 150 mid-sized companies. 

(An open-ended fund replicating/tracking the Nifty Midcap 150 Index (TRI))

The Tata Nifty Midcap 150 Index Fund  seeks to invests in the same companies that are part of the Nifty Midcap 150 Index. This fund may give investors returns that are close to the performance of the index itself (subject to tracking error). 

Be aware that this scheme may follow the index directly and do not try to beat or outperform the market. Instead, it could mirror its performance. However, there is no guarantee of returns. 

This mid-cap mutual fund is open-ended, and you can buy or sell units on any business day at the fund’s NAV (Net Asset Value).

(An open-ended dynamic equity scheme investing across large-cap, mid-cap, and small-cap stocks)

Tata Flexi Cap Fund is an equity mutual fund that may invest in companies of all sizes:

• Large-cap

• Mid-cap

• Small-cap

This scheme may build a diversified portfolio by investing in companies from different sectors and of different sizes. Since it has no fixed rule on allocation, the fund manager may have the freedom to adjust investments across large, mid, and small companies depending on market conditions and opportunities.

Be aware that it is an open-ended scheme and investors can buy or sell units at any time. The fund’s main goal may be capital appreciation (growth in the value of your investment) over the long term. However, like all mutual funds, there is no guarantee of returns.

(An open-ended equity scheme investing across large cap, mid cap, and small cap stocks)

Tata Multicap Fund is an equity mutual fund that may invest at least 25% in companies of all sizes: large-cap, mid-cap, and small-cap. It is an open-ended scheme, so investors can enter or exit at any time. 

This fund seeks to achieve  long-term capital appreciation by investing at least 25% each in large-cap, mid-cap, and small-cap stocks. This may offer diversification and prevent the fund from being tilted toward only one segment. The chosen benchmark is the Nifty 500 Multicap 50:25:25 TRI.. However, there is no guarantee of returns.

So now you have learned that mid-cap, multi-cap, and flexi-cap are different types of equity schemes that invest money in different styles and allocations. These mutual funds are generally suitable for investors who can take very high risks and have a long-term investment horizon. 

If you are wondering which scheme may be right for you, consider this:

• Mid-cap funds let you invest in growing mid-sized companies.

• Multi-cap funds let you diversify and follow a fixed allocation across large, mid, and small companies.

• Flexi-cap funds are dependent on the fund manager to decide allocation based on market opportunities.

Once you have decided on your preferred options, you can consider multiple schemes in each of these categories offered by Tata Mutual Fund™ . Some mutual fund plans you may consider are - Tata Mid Cap Fund, Tata Nifty Midcap 150 Index Fund, Tata Flexi Cap Fund, and Tata Multicap Fund.

 

The views mentioned above are for information & educational purposes only and do not construe to be any investment, legal, or taxation advice. Investors must do their own research before investing. The views expressed in this article are personal in nature and in is no way trying to predict the markets or to time them. Any action taken by you on the basis of the information contained herein is your responsibility alone, and Tata Asset Management Pvt. Ltd. will not be liable in any manner for the consequences of such action taken by you. Please consult your Mutual Fund Distributor before investing. The views expressed in this article may not reflect in the scheme portfolios of Tata Mutual Fund. There are no guaranteed or assured returns under any of the schemes of Tata Mutual Fund.