If you are the kind of investor who is willing to invest a large amount of money and taking a high risk then Large Capital Mutual Fund is the best option for such investors. Investors who seek to invest in long-term with stable returns should opt for large-cap funds.
Understanding the Large capital Mutual Funds
We all know that the stock market is volatile in nature whereas Mutual Funds, on the other hand, are conservative options as they invest a pool of money from investors to various diversified stocks and bonds, allowing investors to own a portion of different securities. Large Cap fund is for relatively cautious investors
What are Large Cap Mutual Funds?
“Market Capitalization” is a financial term that refers to the product of price per share and the number of shares outstanding for the company. Large Cap means the magnitude of the company’s value in the stock market. It is less risky to invest in a company whose size of capitalization is larger. Thus, Large Cap Mutual Funds are made up of shares from companies with large capitalization base.
What Prospects do Large Cap Mutual Funds offer?
The investors prefer to invest in Large Cap Mutual Funds in large blue-chip companies because they are financially strong as compared to other companies and investors still prefer these companies even though their shares are overpriced. The high price in fact is a cost towards the stability that the shares offer. Those investors who look for long term capital appreciation find Large Cap Mutual Funds to be the ideal option for investment. The return on the large-cap mutual fund may be moderate to low but they are more likely to be stable over a period of time. The chance that the corpus of the investor will get eroded is low in large-cap funds when compared with mid-caps and small caps. Only big blue-chip companies are in the position to withstand the economic recession and recover faster after the market fall. The major advantage the large-cap fund provides is moderate returns with low risk.
Benchmark for Large Capitalization Firms
The companies which have market capitalization worth more than rupees 10,000 crores are preferred to invest in a large-cap mutual fund. Most of these companies have sound financials and have low ‘debt: equity’ ratio. These companies are listed in BSE’S 100 indexes. Large-cap companies are there in the industry for a very long period of time. They are strongly established and built economic resilience over a period of time.
Large Capital Mutual Funds and their Advantages
It is well known that “slow and steady wins the race” and similar is the case with large-cap funds, their risk is low as compared to the medium and small-cap funds but their overall returns and growth prospects make them a steady investment option. Mid-caps and small caps are more volatile as compared to large caps. The prospect of large Cap funds can also be predicted to a certain extent. The past performance is not an indicator of future performance, thus the risk is minimized, the overall performance of the large-cap mutual funds provide a stable base. The large caps van opted at any time of the year. Investors who plan to invest in long term funds with stable returns can opt for large-cap funds.
To take the right investment decisions during the market down and up, we need to have very clear guidelines for making financial decisions. To have very clear financial guidelines, one should have a sound financial plan. And an investor should invest according to the plan and the financial goals and objectives.
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