Best Multi-Cap Mutual Funds to Invest in 2020

What are multi-cap mutual funds?

Multi-cap mutual funds are equity-based mutual funds that invest in varying proportions in stocks of different companies. Instead of sticking to a particular market capitalization, multi-cap funds invest in large cap, mid-cap, and small-cap stocks in their portfolio. Since the investment is highly diversified across all markets, multi-cap funds are less risky and popular among investors with medium risk appetite.

Since the stocks are from different market capitalizations, a fund manager can easily switch holdings in the fund between large-cap, mid, and small-cap stocks as he/she deems fit, based on market movements.

Multi-cap funds are excellent for beginners who are unaware of the stock market and different capital markets.

Here are a few things to consider as an investor:

Fund Objective - Multi-cap funds are good investment options as they are an ideal combination of high growth and risk. These funds accumulate considerable growth and offer good returns over the long-run. In addition, the fund manager ensures that the portfolio is composed of quality stocks.

Risk - Multi-cap mutual funds are subject to market risk when there is a rise/fall in the value of the stock index. This leads to a fluctuation in the fund value. The volatility experience by multi-cap mutual funds is higher than that experienced by large-cap funds but lower than small/mid-cap mutual funds.

Cost - A multi-cap fund is subject to an expense ratio. This is the cost of running and maintaining the fund. As per SEBI, the upper limit of expense ratio is 1.05%. Multi-cap funds have a higher turnover ratio and associated transaction cost. When compared with pure large-caps or small-caps, multi-cap funds may be seen to have a higher expense ratio. In short, expense ratio is the annual expense incurred by funds, expressed in percentage of their average net asset.

Investment Horizon - Multi-cap funds are suitable for investors who are looking for a medium or long-term investment horizon. As an investor it is advisable to remain invested in a multi-cap fund for as long as possible in order to realize its full potential.

Financial Goal - Multi-cap funds accumulate substantial wealth over the investment horizon. They are ideal for achieving long-term financial goals such as retirement planning, children’s higher education, etc.

Fund Returns - This is measured by the way of the fund’s performance. Returns are annualized returns, the amount of money earned by the fund in a single financial year. Returns are usually looked on, basis the historical performance. Historical performance measures the annualized returns of the fund over 3 to 5 years. It is advisable to purchase a fund that has performed consistently well over the past five years or since its inception.

Fund Manager - The fund manager plays an important role when it comes to managing a mutual fund. Apart from fund performance, you should also look into the fund's performance under different fund managers. A fund manager with a good reputation is an ideal option. In addition, you can also examine the track record of the fund manager with respect to the success rates in delivering higher returns.

Top Five Multi-Cap Funds for 2020

Motilal Oswal Multi-Cap 35 Fund – Growth Multi-Cap Fund

Type	Open Ended Fund
Investment Objective	To achieve long term capital appreciation by primarily investing in a maximum of 35 equity & equity related instruments across sectors and market-capitalization levels
AUM (Rs. Crores)	13062.21
Benchmark	Nifty 500 TRI
Risk	High
Fund Manager	Snigdha Sharma, Herin Visaria, Abhiroop Mukherjee, Akash Singhania, Gautam Sinha Roy
Return Rate 1 Yr (%)	16.56%
Return Rate 3 Yrs (%)	9.31%
Return Rate 5 Yrs (%)	11.66%

Kotak Standard Multicap Fund – Direct Plan – Growth Multi-Cap Fund

Type	Open Ended Fund
Investment Objective	To generate long term capital appreciation from a portfolio of equity and equity related securities, generally focused on a few selected sectors.
AUM (Rs. Crores)	30546.45
Benchmark	Nifty 50
Risk	High
Fund Manager	Harsha Upadhyaya
Return Rate 1 Yr (%)	19.97%
Return Rate 3 Yrs (%)	12.56%
Return Rate 5 Yrs (%)	11.34%

SBI Magnum Multi-Cap Fund – Growth Multi-Cap Fund

Type	Open Ended Fund
Investment Objective	To provide investors with opportunities for long-term growth in capital along with the liquidity of an open-ended scheme through an active management of investments in a diversified basket of equity stocks spanning the entire market capitalization spectrum and in debt and money market instruments.
AUM (Rs. Crores)	8760.49
Benchmark	S&P BSE 500
Risk	High
Fund Manager	Anup Upadhyay
Return Rate 1 Yr (%)	17.93%
Return Rate 3 Yrs (%)	10.00%
Return Rate 5 Yrs (%)	10.02%

ICICI Prudential Multicap Fund – Direct Plan – Growth Multi-Cap Fund

Type	Open Ended Fund
Investment Objective	To generate capital appreciation through investments in equity & equity related instruments across large cap, mid cap and small cap stocks of various industries.
AUM (Rs. Crores)	5197.29
Benchmark	S&P BSE 500 TRI
Risk	High
Fund Manager	Sankaran Naren, Atul Patel
Return Rate 1 Yr (%)	12.08%
Return Rate 3 Yrs (%)	8.79%
Return Rate 5 Yrs (%)	8.99%

Mirae Asset Emerging Bluechip Fund - Growth

Type	Opne Ended Fund
Investment Objective	To generate income and capital appreciation from a diversified portfolio predominantly investing in Indian equities and equity related securities of companies which are not part of the top 100 stocks by market capitalization and have market capitalization of at least Rs.100 Crores at the time of investment.
AUM (Rs. Crores)	9805.69
Benchmark	Nifty 50
Risk	High
Fund Manager	Neelesh Surana, Ankit Jain
Return Rate 1 Yr (%)	23.37%
Return Rate 3 Yrs (%)	13.72%
Return Rate 5 Yrs (%)	15.10%

If you are a first-time investor with minimum risk appetite, it is advisable to invest in a multi-cap fund as the fund captures all markets and is highly diversified.