Mutual Funds are one of the popular investment vehicles used by the majority of the investors who want to invest in the stock market. Mutual Funds collect the money from the investors to invest in stocks, bonds, or debts and to invest in different types of assets.
Mutual funds are managed by their respective fund managers. Who constantly monitors the growth of the companies in which the fund has invested money and reallocates funds based on the performance of the funds.
Types of Mutual Funds
There are three types of mutual funds, they are determined based on the types of companies in which they invest.
a. Small Cap ( Less than Rs. 5,000 crores of Market Cap)
b. Mid Cap ( Rs. 5,000-20,000 crores of Market Cap)
c. Large Cap ( More than Rs. 20,000 crores of Market Cap)
What is the meaning of a Large Cap?
Large Cap stands for Large Market Capitalization. Companies with high market capitalization and one of the leaders in their sectors are considered to be large-cap companies.
What is a Large Cap Fund?
Large Cap Fund invests a larger corpus of investor's money in Large Cap companies. These types of funds are considered less risky because they invest in companies that are leaders in their sectors. They invest in the top 100 companies of India according to market capitalization. This type of fund gives steady returns and regular dividends.
Things to consider before investing in Large Cap Funds
- Taxes: Taxes are calculated based on the duration of an investment. If you are invested for less than 1 year, STCG is applicable, and if more than that, LTCG is applicable. STCG:15%, LTCG: 10% on the gains of more than Rs. 1 lakh. Indexation benefit is not provided.
- Expense Ratio: Every Mutual Fund has an expense ratio, which is an expense made to manage the fund. It is an annual maintenance charge to finance their expenses. It is deducted from the amount you invested. The lower the expense ratio, the higher will be the returns earned by the investors.
- Past Performance: Check the past performance of the large cap mutual fund in which you are planning to invest. It helps to check whether the fund is consistently performing well or not in the past. Past performance does not ensure future results but it deserves careful consideration. Warren Buffet wrote, “In the business world, unfortunately, the rear-view mirror is always clearer than the windshield”.
- Fund Manager Performance: One should check the fund manager's past performance because he/she is the one who is going to manage your money.
Things one should know before investing in Large Cap Funds
- Risk: Large Cap Funds are for those who have a longer horizon of investment plans. In the short term if the market slumps then large-cap funds follow the same pattern because they are highly invested in the NIFTY50 because it consists of Large Cap stocks. In Longer duration returns are averaged out.
- Returns: The growth of the investment might not be as fast as the small-cap fund's growth, because companies have already grown a lot and now they will have stable growth. Investing in small-cap funds is considered to be risky in comparison to large-cap mutual funds.
- Large Cap Funds are perfectly suitable for those who have a moderate risk appetite and expectation of the moderate amount of returns
Benefits of Investing in Large Cap Funds
- Steady compounders and paying out dividends regularly.
- Steady and Low-risk returns.
- Stability of your investments.
- Capable of withstanding bear markets and also rising with the same speed in bull markets.
- Large Cap Funds have relatively high liquidity.
Who should invest in Large Cap Funds?
Large Cap Mutual funds are best for the one who wants to start investing in equity markets or has a relatively lower risk appetite or the one who is happy with an average CAGR return of 10-12% per year, only if a person is invested for more than seven years.
Best Large Cap Funds
The top 10 Large Cap Funds are mentioned in the table based on the ratings and the returns.
|Fund Name||Ratings in stars (Out of 5)||1Y Return||Fund Size ( in crores)||Expense Ratio(in %)|
|Canara Robeco Bluechip Equity Fund||5||45.09%||3308||0.42%|
|Axis Bluechip Equity Fund||5||43.19%||28,247||0.49%|
|Mirae Asset Large Cap Fund||5||47.39%||26,746||0.54%|
|BNP Paribas Large Cap Fund||4||40.64%||1107||2.29%|
|Kotak Bluechip Fund||4||50.41%||2804||0.92%|
|UTI Master share Unit Scheme||4||50.15%||8426||2.05%|
|Invesco India Large Cap Fund||4||44.61%||343||2.59%|
|Edelweiss Large Cap Fund||4||44.44%||257||2.01%|
|ICICI Prudential Bluechip Equity Fund||4||48.04%||27,994||1.74%|
|IDFC Large Cap Fund||4||40.96%||795||1.25%|
Here all funds are direct plans rather than regular plans. The direct plan is the one that we can invest directly through the mutual fund house. Whereas regular plan is which we buy from brokers, which have high expense ratio due to brokerage charged by them.
The expense ratio is mentioned in the table for the best large-cap funds. If the Expense ratio is 2% and the amount you invested is Rs. 1,00,000 then you have to pay Rs. 2,000 as fund charges annually. If two funds are performing with the same returns, one should definitely go with the fund having a lower expense ratio.
Large Cap Mutual Funds should be part of every portfolio. Here in this article, we have gone through every aspect of the large-cap mutual fund, which one should know. One should select a fund based on his/her investment needs, expectations, goals, and risk tolerance.