So you have finally given in and decided to learn everything about investing in large cap mutual funds? Is everyone around you talking about how they invested 1/4th of their salary and made double or triple via equity funds?
And now you’re wondering if this path is for you too or if you will become one of those guys who lost every penny because they were following the herd? You might!
You might have to regret this decision if you step into this without any knowledge. What worked for your friend may not work the same for you. So advice for today is to read, research and then reach a conclusion. And to help you out, we are here with all the necessary details about investing in large cap mutual funds.
Key Takeaways
- Large cap mutual funds include investments in the top 100 companies in the market.
- They are less volatile and stable and offer optimum benefits.
- Low risk of market crashing when it comes to investing in large cap mutual funds.
- Gains up to Rs. 1 Lakh on stocks brought a year ago get exemption from tax.
What is a Large Cap Mutual Fund?
In large cap mutual funds, investors put their assets in the stocks/ shares of the top 100 companies in the market. These companies are market leaders and offer the stability that mid-cap and small-cap funds can’t.
But there are solid chances that the returns might be lower than mid-cap or small-cap equity investments at times as they are highly volatile. Considering that the bullish market trends do not affect the large companies, the chances of you losing profits are closer to none.
Did You Know?
When the wealth is calculated, mutual funds are not counted in it. Though obviously, it is your wealth, it will not be calculated.
Features to Consider Before Investing Large Cap Mutual Funds
Though these large cap mutual funds and companies are financially stable, they are also subject to various market risks. So while deciding to invest in any top 100 companies, it is mandatory to research and learn about the company’s age, profile, turnover, market performance, etc.
Here are the key features to know as an investor, you should analyze before investing in a large cap mutual fund-
The very first step of investment is to align the scheme’s goal with yours. If it’s not in sync, you need to find another scheme that meets your requirements.
- Hire an experienced manager to manage your funds
Fund managers are capable of generating higher returns by investing your funds in the right places, especially when we talk about large cap mutual funds. Also, if you are new to investment, having a fund manager is a must.
- Check the fund’s previous performance
Before investment, it is crucial to check the past performance of the large cap fund to know whether it has crashed in the past and how much can you lose in the worst-case scenario. If the fund has been consistent in the returns and shows stability under pressure, take it as a yes.
- Check the exit load in the fund
Often overlooked by new investors, it is crucial to determine a figure. The lower the exit load, the higher the returns.
- Know much you will have to spend
You need to know about the brokerage fee, mutual fund house fee, net asset value, and other hidden charges. Sometimes, the mutual houses that charge higher offer higher returns too.
Is Investing in Large Cap Mutual Fund Right Option For You?
Large cap fund is more for conservative investors, considering it offers more stability and the fund’s asset allocation is more redirected towards securities issued by the blue-chip companies, hence the reason why these funds are stable.
As per SEBI regulations, in large cap mutual funds, 80% of the scheme’s funds should be invested in shares/ stocks. Over a long time, large cap mutual funds offer higher dividends, so you will keep receiving funds over a long period of time. The risk is lower as well in this investment
and that is the key feature that conservative investors look out for.
The Net Asset Value of a large cap fund is prone to fluctuate as well because of the subject market risks, but because they have been listed in the top 100 and have higher turnover, they are generally safe.
Also, the large cap mutual funds offer more liquidity, meaning as an investor, you can liquidate your entire portfolio in case the market is going down. This will limit your loss much lower.
Benefits of Investing in Large Cap Mutual Fund
Large cap mutual funds are heavy on returns and the safest funds to invest in for a beginner. Here’s why you should add a large cap mutual fund to your portfolio.
Investment Stability
Take it this way, and these companies are already in the top 100. Now they have stable turnover, a business plan for maybe the next 5 years, consistent income and more, so the chances of these companies going in loss are really slim. Also, these companies have dividends which ensure constant wealth creation.
Resisting market loss
These companies can survive the market under extreme conditions. No matter the stock prices, or NIFTY, these companies will not let you take the fall. These bullish market trends bring down small-cap or mid-cap funds but not large cap funds.
Liquidity
In the current scenario, liquidity is crucial, especially when it comes to large cap mutual funds. As an investor, you can liquidate your portfolio if the need arises. If you are investing in large cap mutual funds, your managers can very easily buy or sell these stocks and can easily maximize the returns.
Top Large Cap Mutual Funds
Here are the large cap mutual funds to invest in 2022 for you to look out for as per the news report-
- Axis Bluechip Fund
- Canara Robeco Bluechip Equity Fund
- Mirae Asset Large Cap Fund
- BNP Paribas Large Cap Fund
- Edelweiss Large Cap Fund
Some of the methods that are used to determine the best large cap fund are-
- Returns offered
- Past performance
- Risk included
- Current performance
- Threshold size
Word to Remember
NIFTY
National Stock Exchange Fifty, also known as NIFTY, is the index for NSE (National Stock Exchange). Its index currently reflects the market value of all the stocks in the index.
On An Ending Note
Large cap mutual funds are a great investment for investors with a lower risk appetite. There are immense profit and lower chances of loss. Also, if you are investing in equity funds for the first time, this is the best option; as for the other investment, you will have to monitor the market and then put your money on the right stocks/ shares, and if your judgment turns out to be wrong, you will lose all your money. And we know that is not an ideal situation anyone would want to be in!
Frequently Asked Questions (FAQs)
Now that everything is digital, you can invest online as well as via fund houses. As per SEBI guidelines, around 80% of the fund’s assets will be allocated to a large cap fund.
This equity investment has a lower risk in comparison to small-cap and medium cap investments. The large cap has a more stable presence in the market as they are a part of the top 100 in the market with a turnover of more than Rs. 20,000 Crore.
The large chip fund is also known as the blue-chip fund. In blue-chip funds, the greatest assets are invested in these large cap companies’ equity and other securities.
You need to know various factors to determine whether the fund is worth investment or not. You will have to look at the company, its current turnover, past performance, current performance, etc. Once you assess it all and understand whether everything has been consistent throughout, you can invest your money.
As per the Economic Times, these are the top large cap mutual funds currently Axis Bluechip Fund, Canara Robeco Bluechip Equity Fund, Mirae Asset Large Cap Fund, BNP Paribas Large Cap Fund, and Edelweiss Large Cap Fund.
