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Must have for your mutual fund portfolio: Large-cap schemes!
Published On , 16 Nov 2016 By Business Line
When an array of Equity Funds spoil you by choice, trust Large-Cap Funds.
WHAT ARE LARGE-CAP FUNDS?
These are Equity Funds investing your money in Stocks of large companies that are stable and established.
HOW DO THEY DIFFER FROM OTHER Equity FUNDS? Equity Funds, by default invest in Stocks. However, there are different types of Stocks. Usually, a particular Equity Scheme invests only in one type of Stocks. In the case of Large-Cap Schemes, the Fund only invests in the Stocks of companies that are worth over ?10,000 crore.
WHY ARE LARGE-CAP FUNDS A MUST-HAVE?
As an investor, especially a new one, you are always looking to minimise risks. Entering the Equity market may be worrisome. So, you may want to invest in companies that have the least risk. This means, investing in large, established companies with a solid growth record and stable future. That’s what Large-Cap Funds do.
WHY DO LARGE-CAP FUNDS HAVE LOWER RISK?
Large companies are usually stable. They do not see bouts of volatile earnings. They are often well-shielded from economic problems. If not, they have the capacity to withstand Stocks. And Stock prices usually mimic the company’s profitability. So, such Stocks are less volatile than Stocks of smaller companies. As a result, they tend to give stable returns with lower risks.
WHO SHOULD INVEST IN LARGE-CAP FUNDS?
Investors who can afford to take on some risk can invest in Equity. And every Equity-friendly investor can, and should, invest in Large-Cap Funds. In fact, it’s recommended that you have diversified Equity portfolio of Large-Cap Funds, Mid-Cap & Small-Cap Funds, and even Sectoral Funds.
WHY ARE LARGE-CAP FUNDS RECOMMENDED FOR BEGINNERS?
If you are just starting to invest in Equity, then Large-Cap Funds are great to begin with. This is because these Schemes invest in brands and companies that you are likely to have heard about. This makes it easier for you to understand the business and your investment.
HOW DO LARGE-CAP FUNDS SCORE VERSUS OTHER ASSETS?
There’s another reason why Large Cap Funds are a must have they usually give better returns than other asset classes and even the bench- mark.
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