Large cap mutual funds are type of equity funds which
invest predominantly in companies with a large
capitalisation. Such schemes invest in companies that are well-established and highly reputed with a
record. When the market takes a hit, these companies are like, "Pfft, we've been through worse. This is
just a walk
in the park for us." Yes, they may not have the potential to provide high returns like the mid or small
companies, but it’s crucial to remember that they are not as risky as these small or mid cap companies.
isn’t experience the best teacher? They have overcome many market challenges and have set a strong
remember that past performance may or may not be sustained in the future.
Here are a few reasons why large-cap mutual fund schemes are deemed to be attractive investment option for your portfolio:
• They can provide relative stability to an investor’s portfolio, owing to the large and established presence that large-cap companies have. This presence typically makes them less likely to succumb to an unforeseen business circumstance.These companies are so well reputed that even when the market is crashing, investors are likely to stay invested in these schemes because of their trust towards these companies.
• Given that a large-cap company has an established business presence, it is easier to trace the worth of a large-cap company and determine accurate valuation. It is easier to research profitability levels, which plays an important role to understand the risk and potential reward of investing in large-caps.
• These companies tend to have a stronger foundation, with established business models, long-standing customer bases, and wider market penetration, which makes them capable of weathering the storm better than their smaller counterparts. Smaller companies can be more vulnerable during times of economic turmoil, as they may have a limited customer base and may be more dependent on external financing.
• Increased demand for large cap stocks results in less volatility and less dramatic price drops during market downturns, providing investors with a buffer against the effects of the downturn.
• Furthermore, large cap companies often have higher cash reserves, which allows them to weather the storm during difficult times. They can use their cash reserves to invest in new ventures, acquire smaller companies, or buy back shares, all of which can help to boost their stock prices and provide better returns to investors.
In conclusion, large cap mutual fund schemes could be a good addition to any investment portfolio. These schemes invest in stocks of companies with high market capitalization, which are usually market leaders in their business and are considered to be more resilient during business adversities. By adding large cap mutual fund schemes to your portfolio, you may benefit from the stability and resilience of these companies, which might help you weather market downturns and achieve your investment goals.
However, past performance may or may not be sustained in future and the same should not be the only consideration for selecting any mutual fund scheme. As always, do consider your financial goals, risk appetite and investment timeline before determining which is the right mutual fund scheme for you.
An investor education initiative by ICICI Prudential Mutual Fund
Visit www.icicipruamc.com/note to know more about the process to complete a one-time Know Your Customer (KYC)requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website (http://www.sebi.gov.in/intermediaries.html). For any queries, complaints & grievance redressal, investors may reach out to the AMCs and / or Investor Relations Officers. Additionally, investors may also lodge complaints on https://scores.gov.in if they are unsatisfied with the resolutions given by AMCs. SCORES portal facilitates you to lodge your complaint online with SEBI and subsequently view its status.(http://www.icicipruamc.com/note)
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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