Mutual funds provide diverse options. Investors with varying risk appetites and investment potential can find a
mutual fund scheme that suits them. For instance, if you are looking for aggressive growth, you could consider
investing in equity mutual fund schemes. This is because equities are generally known for their growth.
But what if you aim for growth and stability in your portfolio together? Large-cap mutual fund schemes could be a choice. Read on to find out more about large-cap mutual fund schemes and explore few advantages of investing in them.
What are large-cap funds?
To understand large-cap fund meaning, you must first understand how mutual funds work. Mutual funds are investment vehicles that use money from many investors to buy a diversified portfolio of stocks, bonds, and other securities. Each mutual fund scheme is run by a professional fund manager, who uses the pooled money to buy securities that meet the scheme's investment goal. For example, a mutual fund scheme might provide growth, income, or a combination of both.
When you invest your money into a mutual fund scheme, you buy units of the scheme. The performance of the securities in the mutual fund scheme's portfolio will affect how much your units are worth. If the securities in the scheme's portfolio do well, the value of the scheme's units will rise, and you can sell your units for a potential gain. If the securities in the scheme's portfolio don't do well, the value of the scheme's units will go down, and you may lose money.
Similarly, large-cap funds are mutual funds that invest in large-cap companies. But what are large-cap companies?
Companies listed in India are categorized into three broad categories according to their market capitalization. Market capitalization (market cap) is a way to figure out how big a company is. It is determined by multiplying the stock price by the number of current shares in circulation.
Market capitalization is a helpful way to figure out how big a company is because it shows how much its shares are worth. It can be used to determine how well the company is financially and generally.
Large-cap companies are those that have market caps of Rs.20,000 crores and more. These companies have a good hold on the market and are generally stable. But what advantage can you get from investing in these companies?
Large-cap funds benefits
• Risk management
Large-cap funds offer exposure to various companies, which can help lower the overall level of risk they are exposed to.
• Professional management
Large-cap schemes are managed by professionals who use their knowledge to select the investments with the most significant potential for growth. These professionals are known as fund managers.
Large-cap companies are typically well-established and financially stable, which can provide a measure of stability for your portfolio. The potential for stability can be achieved by investing in large-cap companies.
Large-cap companies typically have high levels of liquidity, indicating that it is easy to buy or sell their shares.
• Long-term growth potential
Large-cap companies may not offer the same growth potential as small-cap or mid-cap companies, but they can still provide investors with the opportunity for long-term capital appreciation.
Things to keep in mind while investing in large-cap funds
1. Expense ratio
The expense ratio is a percentage that represents the total amount of money that goes toward paying the AMC to manage investments on your behalf. This fee is the cost of doing business.
2. Investment horizon
Large-cap funds are generally considered a good choice for long-term investors. If you only have a short amount of time to invest, consider looking into other investments that could give you returns more quickly.
Depending on how the market is doing, the value of your investment in a large-cap fund may keep changing. When investing in the stock market, it's essential to know the risks and prepare for all possibilities.
Large-cap mutual fund schemes can be a good choice for investors looking for a combination of stability and long-term growth potential. They are generally less risky than small-cap or mid-cap schemes, and they provide investors with professional management and diversification. However, it is vital to keep in mind that large-cap mutual funds, like any investment, carry their own set of risks, and the value of your investment may fluctuate based on market conditions.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.