Best MultiCap Funds for Long Term

1. Introduction

When you invest your money for the long term—say 5 years or more—you want a good mix of safety and growth. Multi-Cap funds are a type of equity mutual fund that spread your money across large-cap, mid-cap, and small-cap stocks. By holding all three sizes of companies, these funds aim to balance risk and reward over time.

In 2025, Multi-Cap funds have become popular because they:

• Follow SEBI rules (at least 25 % in each cap segment)
• Give fund managers freedom to move money where they see the best opportunities
• Smooth out ups and downs, since big, mid, and small companies often rise and fall at different times

This guide explains:

1. What Multi-Cap funds are
2. Why they suit long-term goals
3. How they work
4. Top Multi-Cap funds in India (with data)
5. How to choose the right fund
6. How to invest and monitor
7. Risks and tax
8. Conclusion

2. What Is a Multi-Cap Fund?

A Multi-Cap mutual fund is an equity scheme that invests across all three market-cap segments:

• Large-Cap (big, established companies)
• Mid-Cap (medium-sized companies with growth potential)
• Small-Cap (smaller companies with high growth—but higher risk)

SEBI Rules

From April 2021, SEBI (India’s market regulator) requires Multi-Cap funds to have:

• At least 25 % in large-caps
• At least 25 % in mid-caps
• At least 25 % in small-caps

This ensures true diversification across all sizes of companies.

3. Why Choose Multi-Cap Funds for Long Term?

1. Diversification: Spreading across all cap segments reduces risk if one segment dips.
2. Opportunity: Managers can shift money to mid-caps/small-caps when they look cheap, or to large-caps during uncertainty.
3. Balanced Growth: Mid- and small-caps often grow faster; large-caps add stability.
4. No Market-Cap Bias: Unlike Large-Cap or Mid-Cap funds, Multi-Cap funds are free to invest where they see the best value.
5. Long-Term Compounding: Over 5–10 years, the power of compounding and diversification can boost returns.

4. How Multi-Cap Funds Work

1. Pooling Investor Money: You and many others invest in the fund.
2. Fund Manager Research: Expert managers analyse companies of all sizes, sectors, and valuations.
3. Portfolio Construction: They build a mix meeting the 25/25/25 rule, adjusting weights based on market views.
4. Ongoing Rebalancing: Managers buy or sell stocks to keep the portfolio balanced and capture new opportunities.
5. NAV Growth: As the value of underlying shares rises, the fund’s NAV (Net Asset Value) increases, growing your investment.

5. Top Multi-Cap Funds for 2025 (Data Snapshot)

Here are six of the best Multi-Cap funds based on 1-year returns and fund size (AUM) as of mid-2025. All figures are direct-plan growth options.

These numbers show recent performance. Always check the latest data before investing.

6. Fund-by-Fund Overview

6.1 Nippon India Multi Cap Fund

• Objective: Seek long-term capital growth by investing across market caps and, secondarily, in debt.
• Manager: Sailesh Raj Bhan
• Why it stands out: Large AUM and flexible mix help ride both bull and bear phases.

6.2 Kotak Multicap Fund

• Objective: Generate long-term capital appreciation via diversified equity portfolio across caps.
• Manager: (Check AMC website for current manager)
• Why it stands out: Solid track record and disciplined value approach.

6.3 HDFC Multi Cap Fund

• Objective: Provide long-term growth via diversified holdings in large, mid, small companies.
• Manager: (Check AMC website)
• Why it stands out: Backed by HDFC’s strong research, steady performance.

6.4 Axis Multicap Fund

• Objective: Aim for long-term capital appreciation by shifting allocation across caps based on valuations.
• Manager: (Check AMC)
• Why it stands out: Focus on quality businesses and disciplined valuation framework.

6.5 Mahindra Manulife Multi Cap Fund

• Objective: Deliver long-term growth by investing across market caps with a sizable debt portion if needed.
• Manager: (Check AMC)
• Why it stands out: Flexible allocation and strong mid-cap stock picks.

6.6 DSP Multicap Fund

• Objective: Generate long-term capital appreciation from equity across market caps.
• Manager: Chirag Dagli
• Why it stands out: Can invest in global businesses and debt instruments for stability.

7. How to Choose the Right Multi-Cap Fund

1. Long-Term Track Record: Look for funds with at least 5 years of consistent performance.
2. Returns and Volatility: Compare CAGR (3-year and 5-year) and standard deviation (risk).
3. Expense Ratio: Lower fees mean more of your money stays invested—aim for under 1.5 % if possible.
4. Fund Size (AUM): Very small funds may face liquidity issues; very large funds can become less nimble. AUM between 2,000–20,000 Cr is healthy.
5. Manager Experience: Check how long the current manager has run the scheme. Stability matters.
6. Portfolio Quality: Examine top 10 holdings—look for strong businesses across sectors.
7. Style and Strategy: Some funds lean value, others growth. Pick what matches your comfort with risk.
8. Rating & Research: Use independent ratings (e.g., Morningstar, Value Research) and read the fund’s factsheet.

8. Investing in Multi-Cap Funds

8.1 SIP vs Lump Sum

• SIP (Systematic Investment Plan):
  • Invest a fixed amount (e.g., ₹1,000–₹5,000) every month.
  • Helps with rupee cost averaging—you buy more units when NAV is low and fewer when NAV is high.
  • Encourages discipline and works well for salaried investors.
• Lump Sum:
  • Invest a one-time amount when you have a large sum.
  • Good if markets are attractive or if you receive a bonus or inheritance.

You can combine both: start with a lump sum and continue with SIP for fresh funds.

8.2 How to Invest

1. KYC & Account Setup: Complete e-KYC with PAN and Aadhaar.
2. Choose Platform: Use AMC websites, broker apps (Groww, Zerodha Coin, 5paisa), or bank portals.
3. Select Direct Plan: Choose the “Direct” option to avoid distributor fees.
4. Pick Amount and Mode: Enter your SIP amount and date, or make a lump-sum investment.
5. Confirm & Monitor: Track confirmations and keep an eye on your portfolio.

9. Monitoring and Rebalancing

• Check NAV Weekly/Monthly: Watch how the NAV moves.
• Review Factsheets Quarterly: AMC factsheets list portfolio, sector weightage, returns.
• Compare Benchmarks: Use NIFTY 500 Multi-Cap 50:25:25 TRI as a benchmark.
• Rebalance Annually: If equity allocation drifts too high or low, consider shifting some units to maintain your target asset mix.
• Stay Informed: Read market news—sectoral shifts can affect multi-cap funds.

10. Risks and Considerations

Tip: Hold Multi-Cap funds for at least 5–7 years to ride out ups and downs and benefit from compounding.

11. Tax Treatment

• Equity Funds:
  • Long-Term Capital Gains (LTCG): If held >1 year, gains up to ₹1 lakh per year are tax-free; above that, taxed at 10 % (no indexation).
  • Short-Term Capital Gains (STCG): If redeemed ≤1 year, taxed at 15 %.
• Dividends:
  • Dividend Distribution Tax was abolished; now dividends are added to your income and taxed at your slab rate.

Remember: SIP instalments each have their own 1-year clock for taxation.

12. Conclusion

Multi-Cap funds are a smart, one-stop way to invest across large, mid, and small companies under a single scheme. For long-term goals (5+ years), they combine diversification and flexibility, letting professional managers shift money to the best-valued segments.

1. Understand the 25/25/25 rule and how Multi-Cap funds differ from flexi-cap or large-cap schemes.
2. Compare performance, risk, expense ratio, and AUM before selecting a fund.
3. Use SIP for disciplined investing, or lump sum when markets are attractive.
4. Monitor your holdings regularly, and stay invested through market cycles.
5. Keep tax rules in mind to maximize your after-tax returns.

By choosing the right Multi-Cap fund and staying patient, you can harness India’s growth across all company sizes and build a robust corpus for your future needs.