For investors who value capital preservation and have a low-risk tolerance—particularly those who are getting close to retirement and need a reliable source of income—large-cap mutual funds could be a great option.
Known for their stability, large-cap mutual funds outperform mid- and small-cap funds. This is a result of their investments in the biggest and most well-known companies listed on the stock market. These companies are usually well-known, with long histories of success. Their substantial size makes them less vulnerable to abrupt market fluctuations.
Because of their lengthy history, the stock values of large-cap companies are less erratic. This suggests that your large-cap mutual fund investment will probably see lesser value fluctuations than your mid- or small-cap funds.
An assessment of equity fund returns reveals how compared to other equity funds, large-cap mutual funds are more stable. This indicates that compared to mid- and small-cap funds, their returns are less likely to fluctuate. Due to the inherent volatility of the stock market, even large-cap funds will experience ups and downs.
The fluctuations are typically less dramatic, though. The best thing about investing in these funds is that, since they support well-established businesses, they stand to gain from the long-term prosperity of those businesses.
The following table illustrates the top large-cap funds that continued to earn returns despite recurring market turmoil.
Name of the fund | 5-year returns(in %) | 10-year returns(in %) |
JM Large Cap Fund | 84.04 | 140.32 |
Baroda BNP Paribas Large Cap Fund | 79.94 | 151.79 |
Nippon India Large Cap Fund | 96.83 | 168.79 |
Canara Robeco Bluechip Equity Fund | 70.27 | 149.94 |
ICICI Prudential Bluechip Fund | 83.46 | 154.84 |
| Source: AMFI (As of June 04, 2024) | ||
Why invest in large-cap funds?
Investing in large-cap mutual funds offers several compelling advantages:
- Stability: The biggest and most reputable companies on the market are the investments made by large-cap funds. These businesses are frequently more stable financially and less vulnerable to sudden or economic downturns, which can significantly affect smaller businesses. Because of the decreased volatility that results, your investment’s value will probably fluctuate less.
- Diversification: A large portfolio of stocks from various industries is frequently owned by large-cap funds. Your risk is spread by this inherent diversification, which lessens the impact of the performance of one company on the performance of your entire portfolio.
- Persistent growth: Even though they don’t grow as quickly as smaller startups, large-cap companies have a history of consistent growth. They are therefore a great option for anyone seeking steady, long-term capital building.
- Dividend income: A lot of large-cap companies have sound financial standing and consistently distribute dividends to their owners. These dividends can generate a steady income stream in addition to the capital gains on your investment.
- Reduced risk: Compared to mid- and small-cap funds, large-cap funds have a lower risk profile. People who value money preservation and have a low-risk tolerance or are getting close to retirement will find this particularly appealing.
- Liquidity: Large-cap stocks can be bought and sold on the stock exchange with ease because they are usually very liquid. This makes it easier for you to access the money you’ve invested if needed.
Investing in large-cap mutual funds can be a smart strategy for several reasons, but it’s crucial to understand both the benefits and drawbacks to ensure they align with your investment goals. Your risk profile and financial objectives play a significant role in this decision. While statistics might temporarily influence your preference for a particular fund, ultimately, you must choose an investment that you believe will best help you build wealth in the long term.
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First Published:
5 Jun 2024, 11:30 AM IST
Business NewsMutual Funds5 best large-cap mutual funds that have yielded most returns to their investors
