Unbiased fund comparisons require looking beyond trailing 1-year returns to evaluate rolling return consistency, downside capture ratios, portfolio overlap, and expense drag under SEBI's strict scheme categorization framework.
Explore foundational research notes.
Under SEBI categorization mandates, Multi Cap funds are legally obligated to maintain a minimum allocation of at least 25% each in Large-cap, Mid-cap, and Small-cap equities at all times, regardless of market conditions. In contrast, Flexi Cap funds have complete managerial discretion to allocate dynamically across any market capitalization bucket without mandated minimum caps, allowing fund managers to tilt defensively towards large caps during market peaks.
Both index funds and Exchange Traded Funds (ETFs) are passive instruments tracking an underlying benchmark like the Nifty 50 or Sensex. However, index fund units are bought and sold directly through the AMC at closing Net Asset Value (NAV) without requiring a Demat account. In contrast, ETFs are listed on stock exchanges and trade in real-time throughout market hours, requiring a Demat and trading account, with transactions executed at live market bid-ask prices.
Asset allocation is the strategic division of an investment portfolio across non-correlated asset classes—including equities, debt, gold, and cash equivalents—aligned with an investor's risk tolerance, financial goals, and time horizon. Studies indicate that more than 90% of long-term return variability is determined by broad asset allocation rather than individual security selection or market timing.
Liquid mutual funds are low-duration debt schemes that invest exclusively in short-term money market instruments, commercial paper, and treasury bills with residual maturities of up to 91 days. While bank savings deposits are insured up to ₹5 Lakh by DICGC and provide instant ATM liquidity, liquid funds typically deliver higher market-linked returns with minimal interest rate risk and T+1 business day redemption settlement.