Let’s simplify the word ‘multi-cap’. In simple words, a multi-cap strategy is all about diversifying stocks across the three market capitalization categories (market capitalisation is the total market value of a company's outstanding shares). Such strategies are comparatively less risky than purely investing in mid-caps or small-caps. It is a bundle of large, mid & small-caps, which is suitable for wealth creators as compared to pure large or mid or small-caps.
Talking about the investor class, multi-cap is generally suitable for moderate risk-takers. One should define their risk appetite in such a way that it might help them to tilt their portfolio accordingly. Generally, investors, who are moderate risk-takers, go for this multi-cap strategy. Also, asset allocation plays a major role, which the investors have to keep in mind thereby, showcasing investor’s risk-taking ability.
The best multi-cap combination builds a perfect bridge between moderate risk and high return. When constructed perfectly, these can deliver immense wealth appreciation. The multi-cap strategy takes a concentrated, high-conviction approach to growth investing by stressing on stocks across market capitalisation. Generally, a major focus is on compounding growth and generating value by investing in long-term stocks.
One commonly asked question is which strategy is better, large, mid or small-cap? It all depends on the cycle of the market. There is no such specific strategy which can perform perfectly at all times. To deal with this and also, to safeguard your portfolio, one should consider multi-caps.
The major advantage of the multi-cap strategy is that an investor gets flexibility since the portfolio is formed from a combination of stocks across different sectors. Further, with the help of a dynamic investment strategy, the multi-caps are likely to accrue a substantial amount of wealth in the long-run. The multi-cap strategy is also opted by people for retirement planning, higher education of children, etc.
Moreover, if one is an early learner in the market or someone who has suffered huge losses should also opt for this strategy as it will provide a constancy of large-cap while also providing the growth and higher returns of small and mid-caps.
Remember: ‘Concentrating your assets can make you rich but diversifying your assets keeps you rich’!!
Imperial believes that multi-cap funds are best suited to the new investors who are interested in this fall of the market and they will get very handsome returns on their investment.
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