What are Multi-Cap Mutual Funds?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 12 October 2019
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Multi-cap mutual funds are part of a financial approach that allows investors to diversify the types of caps in growth potential that are associated with different mutual funds. The multi-cap approach is an excellent way to create several layers of investments within the portfolio, so that the components of the portfolio contain various levels of risk. Many investors consider the practice of carrying a mix of mutual funds a prudent way to maintain the overall integrity of an investment strategy.

Sometimes referred to as all-cap mutual funds, there are mutual fund offerings that are available with small, midrange, and large caps on the potential return. Essentially, the higher the cap on the investment opportunity, the greater the risk involved with the venture. Part of the genius of the multi-cap package is that the investor is assured of having some options that will perform well in just about any market condition. If large caps are not performing well at a particular point in time, there is a very good chance that the mid-range and small cap mutual funds will be doing very well. This will mean that even though some of the components of the mutual fund package may temporarily experience a loss, the remaining components offset the loss and usually will even post some net growth for the period.


All-cap market capitalization is not only an attractive option because of the built in protection to the investor, but also because it appeals to such a broad range of investors. People who are somewhat conservative in their investment strategy can still operate well within their comfort zone, while still using the multi-cap approach to stretch that zone a little. Investors who don’t like to depend on one given level of risk with their investments will find the diversity with multi-cap mutual funds to satisfy that urge for variety. Investors who like to take a risk now and then can have some fun with the large cap components in the multi-cap package, and still have some ongoing stability of return from the mid and low caps involved with the strategy.


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