Large Cap Mutual Funds

  • by admin
  • Sep 17, 2021

Mutual funds are categorized as large-cap funds, mid-cap funds, and low-cap funds according to the market capitalization of companies. Large-cap funds invest most assets in top-notch companies with stable growth and are not severely affected by market changes. As a result, large-cap funds offer steady returns, good capital appreciation in the long run, and regular dividends.

Therefore, it is the ideal investment avenue for risk-averse people or people who do not want their returns to fluctuate significantly, like investors new to equity funds.
A large-cap fund is also ideal for people willing to invest their assets for a long-term window, like people planning investments for their retirement.

However, it is also essential to keep in mind that large-cap fund returns are low. So only invest in these if you want stable compounding of assets at minimal risks.
Since large-cap fund returns are comparatively lower than other mutual funds, it is best to hold them for a minimum of 3 to 5 years. Thus, large-cap funds are best for people who have surplus cash with them.

Large-cap funds are also a good investment option for people who want to take advantage of market fluctuations but do not wish to engage in high-risk investment options.

It is also critical to keep in mind that a tax of 15% is levied on your capital gains from large-cap funds if you hold your funds for less than a year. Hence, it is not a good option for people with short-term investment goals.

Features of Large Cap Mutual Funds

Expense Ratio

Fund houses charge a fee to supervise your investments in large-cap mutual funds. This fee is called the expense ratio; it amounts to a certain proportion of the fund’s total assets. SEBI has capped this expense ratio to 2.5%, meaning no company can charge more than that to manage your investment portfolio. However, it is wise to research and look for a scheme that offers a lower expense ratio to have maximum returns.

Investment Period

Large-cap funds invest in top-tier companies which are already at their highest potential; hence the growth of the companies is not exponential but relatively slow and steady. Coupled with this, these funds are liable to market changes, although any slump in return is made up in the long run since blue-chip companies are financially stable and can seldom crash down completely. Hence, these funds are meant to maximize returns for a longer time horizon.

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