What is A Large-Cap Mutual Fund/Stocks? (2024)

FAQs

What is A Large-Cap Mutual Fund/Stocks? ›

Large-cap stocks are stocks that are in the top 70% of capitalization of the equity market. The category is the biggest in terms of market share. A growth fund is a mutual fund that includes companies that are likely to have faster revenue or earnings growth than their industry peers or the overall market.

Large Cap funds are a kind of equity funds that invest a major proportion of their assets under management (AUM) in equity shares of companies with a large market capitalization, such as Reliance, HUL, TCS, and more.

Large cap refers to a company with a market capitalization value of more than $10 billion. Also referred to as “big cap,” large cap describes a class of popular stocks preferred by investors for their stability. When investors select their stocks, they must decide between risk and reward.

That's why the American Association of Individual Investors recommends that investors allocate only 20% to 25% of their portfolio to large-cap stock. That said, your asset allocation could differ from these types of guidelines based on your risk tolerance and investment goals.

For large-cap funds, the benchmark could be Nifty50, while for small-cap funds, the benchmark could be Nifty Smallcap 100. Next, you determine the performance measurement period, such as one year, three years, or five years, depending on your investment horizon and goals.

The first 100 companies ranked according to their market capitalization by the stock exchanges are known as large cap companies. These stocks have a market cap of more than Rs. 20,000. The companies with rankings from 101 to 250 are known as mid cap companies.

While Large-cap Mutual Funds are safer than mid-cap and small-cap funds, they are not entirely risk-free. Market conditions can still affect the fund's performance but to a lesser extent. It's essential to understand these risks and align them with your risk tolerance.

For example, you can measure the performance of a large-cap stock fund against the S&P 500 — the standard benchmark for large-cap equity performance – because it includes many of the stocks that this type of fund holds in its portfolio.

Indeed, a good mix of equities (yes, even at age 70), bonds and cash can help you achieve long-term success, pros say. One rough rule of thumb is that the percentage of your money invested in stocks should equal 110 minus your age, which in your case would be 40%. The rest should be in bonds and cash.

How much should I invest in large-cap funds? ›

“Ideally, you'll invest somewhere around 15%–25% of your post-tax income,” says Mark Henry, founder and CEO at Alloy Wealth Management. “If you need to start smaller and work your way up to that goal, that's fine. The important part is that you actually start.”

Aggressive Investor: A risk-taking investor can think about investing 50–60% of their portfolio in large-cap stocks, 15–25% in mid-cap stocks, and the remaining 15–25% in small-cap stocks.

Large companies fare better in a volatile market as these companies may be market leaders and resilient to downturns. That is why if you are looking for a relatively safer mutual fund category, you should consider investing in large cap funds.

Large-cap funds prioritise stability with lower risk, ideal for conservative investors. Mid-cap funds offer a balance, providing growth potential with moderate risk. Small-cap funds hold the allure of potentially high returns, but come with the most significant risk.

Large-cap are top 100 companies with high market value (market cap) of around Rs 20,000 crore each or more. They are also called 'blue-chip stocks'. Mid-cap companies are those ranked between 101 and 250 in terms of market capitalisation of around Rs 5,000 to Rs 20000 crore each.

Large-cap stocks are represented by the S&P 500; mid-cap stocks by the S&P MidCap 400 Index; and small-cap stocks by the S&P SmallCap 600 Index. These indexes are unmanaged and do not take into account the fees, expenses, and taxes associated with investing.