Choosing right funds for your portfolio

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Investing in mutual funds is often considered a safer option. However, is investing in multi-cap or flexicap funds better than investing separately in largecap, midcap, or smallcap funds? Sebi’s fund categorization framework divides the funds mostly on the parameter of the market cap of the stocks in the portfolio. The investor can pick and choose accordingly and allocate in the portfolio as per suitability.

The Money9 Helpline hosted Kaustubh Belapurkar, director – manager research, Morningstar, to answer all the mutual fund investment-related questions from the callers.

Edited excerpts:

Soumya Das, Kolkata: What is the advantage of investing in multi-cap funds instead of investing separately in largecap, midcap, and smallcap funds?

Belapurkar: The multi-cap funds have an important advantage. The three funds- smallcap, midcap, multi-cap have high volatility. Smallcap have higher volatility than the other funds. If these funds are incorporated individually in the portfolio, then the fall experienced will be greater, which will create panic in the investors. If the same is invested in the multi-cap then the panic is less as the volatility risk is lesser. Multi-cap also helps in diversifying the portfolio.

Nirupam Mondal: Sir, I have a SIP in SBI Small Cap (8% of equity portfolio) for 20 to 25 years. Should I continue?

Belapurkar: You are doing the right thing. This fund is doing very well. The time horizon is also good. I would suggest to stay invested.