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Everything You Need To Know About Large-Cap Funds

What makes large-cap funds reliable and consistent? And why should you even be investing in these large-cap funds? Let’s break it down & understand everything you need to know about large-cap funds.

Priya Bansal

Large-Cap, Small-Cap, Mid-Cap, Multi-Cap… Is all the financial jargon around mutual funds confusing you? I’ve put on my thinking cap to help you understand all the fuss around these caps.

You may have gotten suggestions from friends and family to invest in “big companies” or “large-cap funds” because they are “reliable” and “consistent”.

But what makes them reliable and consistent? And why should you even be investing in these funds? Let’s break it down & understand large-cap funds.

What Are Large-Cap Mutual Funds?

Equity mutual funds which invest a large chunk of their money in companies that have a huge market capitalization are known as large-Cap Funds. According to SEBI guidelines, any company with a market cap of above ₹ 26,677.06 Cr is a large-cap company. 

Basically, these companies have a huge market capitalization because they are iconic industry leaders. This is why large-cap companies have a proven historical track record of creating steady wealth and consistent dividends over the long term for their investors. 

We suggest you read the following blogs as well to develop a thorough understanding of what these different caps mean:

Who Should Invest In Large-Cap Mutual Funds?

Large-cap funds are ideal for investors looking to grow wealth over 5+ years. So generally, these funds can find their way into retirement plans, your child’s university/college fees, or to simply pay your future self. 

Thus, to get the most out of these funds, you must be prepared to stick to the fund for the long run. 

People invest in large-cap funds to:

  • Diversify your portfolio: Since this is a low-risk, low-reward investment, it can be a good addition towards building a balanced portfolio
  • Add stability: The stable returns and consistent dividends that these funds offer can be a reassuring prospect for investors
  • Risk-averse: This can be suitable for investors who want to minimize risk
  • Long term benefits: Historically, these funds have been known to generate returns of around 10-12% over the long term

Oh by the way! Here is a list of the Best Equity Funds To Invest In July 2020.

The Advantages Of Investing In Large-Cap Mutual Funds

Generally, a company’s market cap determines the benefits and associated risks of investing in it. So larger the market cap, lesser the risk and better returns. This is one of the biggest reasons why large-cap funds are considered to be less risky as compared to small-cap or mid-cap funds. 

Here are some of the other advantages of investing in large-cap funds:

  • Less volatile compared to small-cap funds
  • Usually give consistent returns over the long term
  • Are backed by a proven track record
  • Are highly liquid & easy to sell compared to other funds
  • Usually average out the loss incurred during rough periods over the long term

What are the Top 20 Best Mutual Funds in India for 2020?

The Disadvantages Of Investing In Large-Cap Mutual Funds

While large-cap funds are more stable and less risky as compared to small-cap and mid-cap funds, they do come with their own share of disadvantages.

Here are some of the disadvantages of investing in large-cap funds:

  • Only suitable for the long term
  • Generally prone to NAV fluctuations (but not as erratically as small-cap or mid-cap funds)
  • Are subject to short and long term Capital Gains Tax
  • Offer moderate returns compared to Small-cap/Mid-cap Funds

Wondering how you should
invest during a pandemic?

Large-Cap Funds Currently Recommended By Cube’s Wealth Advisor

All mutual funds on the Cube Wealth app are picked by our amazing wealth advisor, Wealth First. They have made it easy for Cube Wealth users to invest in suitable schemes by curating a list of the top funds for every month.

Wealth First has a track record of beating the benchmark by ~ 50%. They have over 3,000 clients and an AUM of ₹7,000+ Crores. You can speak to our Wealth Coaches today to learn more.

Note: All facts and figures are updated as of 23/09/2020.

While we update our pages regularly, we advise you to check the Cube Wealth App for the latest data.

Try our free MF analysis tool

Should You Invest In Large-Cap Mutual Funds? 

Before investing in any scheme, it is important to understand what your goals are and the risk profile. Talk to our wealth coaches to understand if this is the right investment for you.  

That said, large-cap funds can be a stable addition to an investor’s portfolio regardless of age because they offer steady returns with reasonably lower risk. 

You can download the Cube Wealth app today to check out the QuickSIP feature. It allows you to invest based on your risk appetite and investment goals. 

Check out this video on how to start investing in Mutual Funds

Priya Bansal

Curious about personal finance and all things money. Can either find me reading a book or dancing to a tune.

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