Will the flexi cap bubble burst? At the outset we would like to state that although this may sound like an intimidating prophecy, our intention is to simply caution investors.

We are witnessing at present what can be termed as 'irrational exuberance' in favour of flexi/multi cap fund IPOs. Simply put, these are mutual fund schemes which have the flexibility to invest in stocks across market segments (large caps, mid caps, small caps); hence the fund manger is equipped to invest in the 'in flavour' market segment.

While there is nothing intrinsically wrong with flexi/multi cap funds, investors should be aware of the risks they take on by investing in such funds.

The fund manager is at all times on the lookout for the next big investment opportunity. Consequently the portfolio is likely to be churned rapidly; aggressive bets taken and safety may be compromised to clock growth.

These funds would clearly classify as far riskier propositions vis-�-vis their counterparts in the regular diversified equity funds segment. There is an urgent need for investors to assess if they need such a product in their portfolios and also what proportion of their portfolios needs to be invested in the same.

In fact the investor enthusiasm at present is fairly similar to the one which was witnessed in December 2004; monthly income plans (MIPs) were then the season's flavour.

MIPs were perceived as wonder products which provided the stability of debt and power of equities. Distributors and investment advisors played their part by selling MIPs as investment avenues offering assured returns.

The consequent turnaround in markets and MIPs' fall from grace has been very well chronicled.