1. Fund Structure and Asset Allocation
Flexi-Cap Funds
are completely stock oriented, where the investment choice remains entirely with the fund manager, and a company of whatever size could be large, mid or small-cap depending upon growth opportunities.
This provides the maximum return by going to the extent of changing market situations, though it makes the fund more volatile as it exposes the investor fully to stock market fluctuations.
These funds are better suited for long-term investors with high risk tolerance.
Whereas;
Aggressive Hybrid Funds
consist of equities (65% to 80%),
while debt would be 20% to 35%.
This fund is bound to generate growth through the equity part and stability through the debt part. The overall shock from the market fluctuation gets absorbed.
This structure therefore reduces the overall risk of the fund compared with a pure stock fund while presenting relatively consistent returns with a relatively moderate rate of growth.
Recommended for medium-term investors who are willing to bear some risk but do not want to go the full aggressive route with the hope of growth and some protection against volatility in the market.
2. Risk and Return Profile
Flexi-Cap Funds
A purely equity-based fund, Flexi-Cap Funds are rather risky as they always have an investment in equities.
The value can go up as well as come down with the market. But they do pose a possibility of higher returns especially in the long run.
Aggressive Hybrid Funds
Having some amount in debt, these are less risky than Flexi-Cap Funds.
The debt part helps take care of any fluctuations in the stock market so tend to have lower returns than Flexi-Cap Funds but are less volatile.
3. Investment Horizon
Flexi-Cap Funds
It is most suitable for investors who have the time horizon to invest in the fund for more than 7-10 years or much longer, as it will allow recovery from the market ups and downs and take benefit of growth in stocks.
Aggressive Hybrid Funds
Medium-term goals, between 3 and 5 years. The debt component does stabilize; thus, this is for the investor who requires growth but is not willing to wait as long as in Flexi-cap Funds.
4. Returns Comparison
Flexi-cap Funds
have averaged about 44.11 percent one-year returns, thus making them very attractive for high returns.
Thus greater the potential return, the greater the risk.
Aggressive Hybrid Funds
In the last two-three years, these funds have provided between 16.04% to 18.35% in terms of annual returns on balanced growth,
which is relatively safer compared with Flexi-Cap Funds.
5. Risk Tolerance and Volatility
Flexi-Cap Funds
Highly volatile-fund values can be subject to more significant value fluctuations. Suitable for people who are willing to take higher risks.
Aggressive Hybrid Funds
With some debt for stability, these funds are much more comfortable to investors with a relatively moderate risk appetite.
6. Suitability for Investment Goals
Flexi-Cap Funds
These are meant for long-term goals, saving for retirement, funding for a child’s education, or building wealth.
Since these funds have flexible investment across companies, it is quite useful for long-term growth.
Aggressive Hybrid Funds
More suitable for a medium-term goal like setting money for a house down payment, a car, or a big trip.
7. Portfolio Management Strategy
Flexi-Cap Funds
They are actively managed funds, where the fund managers continuously change investments in various companies of different sizes in reaction to the economy as well as emerging trends on the market.
Therefore, they require very good managers who can spot good opportunities.
Aggressive Hybrid Funds
The investment becomes more balanced in its approach, looking to grow while attempting to reduce the risk and providing some debt allocation as well.
This is normally adjusted periodically for the right equity and debt mix. This one is less intensive in its approach.
8. Tax Efficiency
Flexi-cap Funds
Taxed just like any other equity fund. In other words, a gain of less than one year is taxed at 15% and a gain exceeding ₹1 lakh from an investment held for over a year is taxed at 10%.
Aggressive Hybrid Funds
Similar taxes to Flexi-cap Funds as these are highly equity-oriented. But the debt component faces a marginal effect on tax because of the way it had been managed and rebalanced in the fund.