Flexi-cap vs large-cap: Which mutual fund is better and why?

livemint.com:

diversification and willing to navigate market fluctuations. Flexi-cap schemes offer the flexibility to adjust allocations based on current market conditions and emerging opportunities. “Unlike the constraints of single large, mid or small-cap schemes, which focus solely on respective companies, flexi-cap schemes provide the opportunity to adjust the allocation according to prevailing market conditions and opportunities.

This adaptability has provided flexi-cap schemes increasingly favoured among investors seeking portfolio diversification," said Gurmeet Singh Chawla, Director at Master Capital Services Ltd. Large-cap companies are robustly capitalized entities with stable operations and solid balance sheets, often leading their respective markets and exhibiting consistent growth over time. They typically deliver moderate capital appreciation during bullish market phases while demonstrating resilience against downturns.

Moreover, their high trading volumes ensure ample liquidity within the fund. Mid-cap and small-cap companies, on the other hand, represent smaller yet growing enterprises. They offer the potential for compounded returns due to their extended growth trajectory, often outperforming benchmarks during economic expansions.

However, they are more vulnerable to market downturns and may face liquidity challenges. Flexi-cap schemes provide an alternative to large-cap schemes by offering exposure to a mix of large, mid, and small-cap stocks. This allows for stability through the liquidity provided by large-caps, while also presenting opportunities for alpha generation with mid and small-caps.