Multicap Marvels: Why is This Asset Class Investors’ New Favourite?

Investors often seek investments that balance stability and growth with reduced risk. While this combination is hard to attain, the multicap funds have proved themselves to be the best match.

By spreading investments across large-cap, mid-cap, and small-cap stocks, they offer a well-rounded approach. In this blog, let us explore the key reasons why multicap funds are gaining popularity among investors.

What are Multicap Funds?

A multicap mutual fund is an equity fund. It invests across large-cap, mid-cap, and small-cap companies. It provides investors with a diversified portfolio by including companies of different market sizes.

The key features of the multicap funds are as follows:

• Minimum 25% each in largecap, midcap, and smallcap as per SEBI guidelines.
• Spreads investment risk across market segments.
• Managed by fund managers.
• Ideal for wealth creation, retirement, or children’s education.
• Offers both safety and high return potential.

Why Are Investors Choosing Multicap Mutual Funds?

Many investors are choosing multicap funds for balanced returns and lower risk. The other key advantages worth knowing are as follows:

1. Diversification

Investors have become more aware of concentration risks. This is where multicap mutual funds deliver smarter diversification by investing at least 25% each in large, mid, and small-cap stocks, as SEBI mandates.

This ensures balanced exposure to all market segments and sectors. This strategy allows inventors to grow their investment while reducing the risks.

2. Professional Management

Multicap mutual funds are managed by experienced professionals who actively adjust allocations within SEBI’s mandated limits, shifting investments between large, mid, and small caps as market conditions change.

This tactical approach allows the fund to capitalize on growth opportunities and manage risk more effectively. This makes it a key advantage for investors.

3. Reduced Volatility in Uncertain Markets

Multi-cap mutual funds offer enhanced stability during market uncertainty by investing across large, mid, and small-cap stocks. This diversified approach cushions the impact of volatility in any single segment, smoothing overall portfolio returns.

As a result, investors benefit from more consistent performance and greater resilience while maintaining growth potential.

4. Long-Term Wealth Creation

Multicap mutual funds are perfect if you are looking for long-term investment and wealth creation. By participating across market cycles and capturing growth from all segments, they help investors build a robust portfolio.

Through this, the investors can get compounded returns over time. Hence, this makes them suitable for goals like retirement or children’s education planning.

5. Tax Benefit

Multi cap mutual funds are taxed as equity funds. If you redeem your units within one year, gains are considered short-term and taxed at 20%. For investments held over one year, long-term capital gains up to ₹1.25 lakh per financial year are tax-exempt. The gains above this threshold are taxed at 12.50%. This structure rewards longer-term investors with better tax efficiency.

Top 5 Multicap Funds in 2025

There is no doubt that investing in multicap funds is a great decision for the long run. Now, let us explore the best multicap funds to invest in 2025:

Conclusion

Multicap funds are a suitable choice if you are aiming for long-term growth with ease of management. With built-in diversification and active allocation, they simplify decision-making while balancing risk and return.

If you prefer a single fund that works across market cycles, multicap can be an option for your investment journey.