What Are Large-cap Funds?
Large-cap funds are mutual funds that invest a major proportion of their assets under management (AUM) in equity shares of companies with a large market capitalisation. These companies are often leaders or have leading market share in their domain of expertise, such as TCS for IT or ITC for consumer goods etc.
These companies are also mostly known by every investor, thanks to their large base of users and market position. They are also known to enjoy a high reputation in the market and any unexpected news about them can have an adverse impact on the entire sector. Finally, large-cap funds also attract investment from foreign investors as they are considered safer options compared to mid-cap and small-cap funds.
Reasons To Invest In Them
One prime reason to invest in large-cap funds is due to their inherent stability. Since these funds invest in sound companies with top management, investors can also look forward to lower volatility and some sort of steady dividend income even during a bear market. This is a significant advantage and overrules the argument that large-cap funds might have less growth potential because of their market-cap and may miss wild swings during broader bull runs.
Large-cap funds, therefore, make a lot of sense for investors who are happy to invest their money in safe, stable and large companies with slightly lesser growth potential compared to unknown companies with uncertain growth prospects that have a lower market-cap.
Large-cap companies also set the benchmark in terms of being established, trustworthy and following strong corporate governance practices. Research and valuation into them is often the standard to which other smaller companies are compared with, adding yet another layer of security for investors.
Factors To Consider Before Investing
One of the first things to consider before investing in large-cap funds is your risk appetite. Large-cap funds might be ideal for someone who’s dipping their toes in the mutual fund market for the first time since these are generally the safest funds to invest in. Besides, investors with a moderate risk profile who want some stability in their equity mix can also opt for large-cap funds.
Another factor to consider is the performance of the fund over both bull and bear cycles of the market. A relatively newer large-cap fund might not have the same command to shield and grow your investment during bear and bull cycles respectively. Keep an eye out for a fund that has consistently beaten its benchmark index and outperformed its peers. If you find a fund that does that and has a reasonably long and consistent track record, your homework is half done.
All you have to do next is figure the cost of the fund, also called as an expense ratio. A fund with a lower expense ratio that gives you higher returns is the one you should keep an eye out for.
Which Large-cap Fund Is The Best?
If all of that sounds too much, then it probably actually is. That’s also because there are many options to choose from, making the process of selecting the best large-cap fund even more complicated.
Thankfully, we’ve done the homework for you and can recommend the Aditya Birla Sun Life Frontline Equity Fund that invests capital across various large-cap industries and sectors to deliver the best results.
Launched more than two decades ago, the fund has delivered an incredible return of 19.08% since inception. The fund’s top 10 invested companies include names such as ICICI Bank Ltd., HDFC Bank Ltd., Infosys, Reliance, L&T among other reputed and profitable large-cap companies.
For investors looking to manage and grow their investment for a period of three years and more, Aditya Birla Sun Life Frontline Equity Fund is the way to go. You can start with a minimum investment of just INR 100 and be a part of this large-cap fund by signing up here.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.