The Benefits Of Investing In Large Cap Mutual Funds

Investing in equity mutual funds can be an overwhelming task for many investors. It involves considering multiple factors such as picking a scheme with the right combination of stocks, quality fund manager and tracking the past performance.

One of the most important parameters when selecting an equity portfolio is the company's market capitalization or size, as it helps determine the associated risks and benefits of investing in the respective company. Based on market cap, equity mutual fund schemes are mainly divided into large cap mutual fund, mid cap mutual fund, and small-cap mutual funds.

In this post, we specifically focus on large-cap mutual funds and understand how they work along with the benefits of investing in them.

What Are Large-Cap Mutual Funds?

Large-cap funds are the equity fund that primarily invest in top 100 companies by market capitalization. For first-time mutual fund investors, large-cap funds offer a good choice as they have proved to be excellent for wealth creation in the long term. These funds are known to be both steady and sustainable in terms of generating excellent returns.

Large-cap funds are best suited for investors with a long-term investment horizon and a relatively lower risk appetite. Since large-cap companies fall in the top 100 of the list of companies as per the market capitalization, investing in these companies is considered less risky and steady. 

Below are some of the other key features of large-cap funds-

• Typically considered for long term investment purpose
• Carry a diversified portfolio
• Invest in companies with a proven track record.

Benefits of Investing in Large-Cap Mutual Funds

Investing in large-cap mutual funds has its share of benefits that investors can get. Some of the advantages of investing in large-cap mutual fund schemes are-

• Better Capital Appreciation

Since large-cap mutual funds schemes generally invest in blue-chip companies known for stable earnings and high performance, the chances of their stock prices fluctuating are quite less. For this reason, they are more likely to offer capital appreciation to investors over the years. Large-cap funds are also considered ideal for meeting long-term financial goals such as child education or retirement planning.

• Research and Valuation

Because large-cap organizations typically have a long business tenure, investors and creditors get the advantage of solid research on company operations and profitability levels. Most publicly traded large-cap companies are needed to provide shareholders and potential investors with accurate and periodic financial statements, thus allowing for ease in assessing whether a company is worth the investment.

• Investment Stability

Large-cap funds offer investment stability because the companies they invest in are less likely to face economic troubles. They are generally not affected by market fluctuations and thus provide great stability to your portfolio. Apart from this, large organizations also give investors the benefit of dividends which helps in the steady wealth creation over a period of time.

• Diversity

Large-cap mutual funds portfolio primarily consists of equity instruments of large-cap firms. Having such a diversified portfolio benefits investors as the risk profile of the fund gets balanced. Further, these funds are managed by professional fund managers and research analysts who diversify the portfolio and invest the total investment amount in various sectors to minimize risks and offer good returns.

To Conclude

When you’re in the process of building your mutual fund portfolio, the best approach is to spread your investments. And one of the best strategies to build up your portfolio is to integrate both small-cap mutual funds and large-cap mutual funds into it.

Large-cap mutual funds are ideal for you if you are a beginner in mutual fund investment or someone with a low-risk appetite.

Irrespective of the type of large-cap funds that you decide to invest in, make sure to get help from the trained experts of PGIM before you take action. PGIM makes it super simple to invest in large-cap funds and gives you a clear portrait of what to expect in terms of returns as well as risk.