InvestorQ : Can multi-cap funds safe & which funds are best to invest?
Priyanka N made post

Can multi-cap funds safe & which funds are best to invest?

3 years ago
Mutual funds are classified on various parameters. These classifications help investors choose the fund that suits them best. One example of classification is based on market capitalization. Multi-cap funds are diversified equity funds that invest in different proportions in stocks of companies across market capitalizations to optimize return on investment.
Instead of sticking to a particular capitalization, these funds incorporate large-cap, mid-cap, and small-cap stocks in the portfolio in a specific proportion.
The returns from these funds depend primarily on the fund manager. His view of the markets influences returns. It will depend on how the manager picks stocks based on market conditions. Multi cap funds have the potential to offer higher returns. Over three years, these funds have given average returns of 6%-9 %. Average Returns over five years stands at 9%-12% range over different market phases. Some of the funds have given returns as high as 13%-15% over a five-year time horizon.
Since these schemes may also invest in mid or small-cap stocks, they are riskier than large-cap schemes that invest predominantly in very large companies. However, because of this exposure to mid and small-cap stocks, multi-cap mutual fund schemes may also offer higher returns.
Multi cap mutual funds can help you get the most of a bull market. At the same time, it can ride out bear markets too. These funds are a good option if you want to participate in the full market cycle over medium to long terms.
Therefore, in the long run, multi-cap funds are usually better wealth creators than other categories of funds as they can take advantage of investment opportunities across the market. 
The following funds are considered as the top multi-cap funds in India based on the past 5 years' returns.
Motilal Oswal Multi cap 35 Fund – Growth Multi-Cap Fund
Kotak Standard Multi cap Fund – Direct Plan-Growth Multi-Cap Fund
Kotak Standard Multi cap Fund – Growth Multi-Cap Fund
SBI Magnum Multi-Cap Fund – Growth Multi-Cap Fund
ICICI Prudential Multi cap Fund – Direct Plan-Growth Multi-Cap Fund