Large-cap funds are a type of equity mutual fund which invests primarily in large-cap companies. These are the top 50 companies listed on the stock market. These companies are well-established with a strong market reputation.
In this blog, let's discuss the factors you must consider before choosing the perfect large-cap mutual fund and some of the best-performing funds in the market.
Top 3 best performing large cap mutual funds
Motilal Oswal Large Cap Fund
The objective of this fund is to achieve long-term capital growth by predominantly investing in equity and equity-related instruments of large-cap companies.
Nippon India Large Cap Fund- Growth Plan -Growth Option
The scheme will invest in equity or equity-related instruments of companies that fall within the market cap of the largest and smallest companies in the BSE 200 index.
ICICI Prudential Bluechip Fund - Growth
This fund's investment strategy involves investing in 20 large-cap companies selected from the top 200 stocks on the NSE based on market cap. If the fund's total assets exceed Rs 1000 crore, additional large-cap companies can be included in the portfolio.
Here is a list of the top performing equity large cap mutual funds:
Source: Advisor Khoj
Factors to Consider Before Opting for a Large-cap Equity Mutual Fund
When selecting the best large-cap mutual funds for 2024, keep the following factors in mind:
- Large-cap funds generally offer moderate returns compared to small-cap or mid-cap funds. It is because large-cap companies are mature and well-established. They provide stable but not very high returns.
- While large-cap mutual funds carry lower risks than other equity funds, they are not risk-free. They still experience market fluctuations similar to other equity investments.
- Large-cap mutual funds are best suited for you if you have a long-term investment horizon, as they tend to provide better returns over extended periods.
Advantages of Investing in a Large-Cap Mutual Fund
1. Lower Risk: Large-cap funds generally have less risk in comparison to other equity funds.
2. High Liquidity: You can easily redeem units of large-cap funds at any time, with partial withdrawals also possible.
3. Stability: Large-cap companies are better equipped to withstand economic downturns and provide stability for your investments.
4. Capital Growth: These companies have robust operations, sound business models, and a history of consistent revenue generation, which leads to a steady growth in your invested capital.
5. Sectoral Diversification: Large-cap funds invest in blue-chip companies in various sectors.
Risks Involved in Large-Cap Mutual Funds
- Market performance can be adversely affected by internal and external factors such as geopolitical events and economic conditions, making these risks unavoidable.
- Liquidity risk arises when fund managers are forced to sell securities due to a lack of buyers, making it difficult to liquidate the fund and requiring you to remain invested longer.
- Increasing interest rates can lead to a decrease in security prices. These rates are influenced by factors such as the issuer's credit availability and market demand.
- By understanding these factors and risks, you can make more informed decisions when investing in large-cap mutual funds.
Conclusion
Investing in large-cap mutual funds offers a balanced approach to growing your wealth, combining lower risk with the potential for stable returns. Understanding the associated risks, such as market fluctuations and liquidity issues, can empower you to make informed decisions and achieve your financial objectives.
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