Personal Finance

All you need to know about Large Cap Mutual Funds

January 10, 2020

All you need to know about Large Cap Mutual Funds

 

Large Cap Funds are open-ended mutual funds that invest at least 80% of the total assets in equity and equity-related instruments of large cap companies. As per AMFI’s list of stocks, large-cap stocks fall between the 1st and the 100th rank in terms of full market capitalisation. The fund manager picks stocks of large and established companies that hold a long track record and are leaders in their respective industries. This feature makes the NAV of a Large Cap Fund relatively stable even during intense market volatility.

Your investments in a Large Cap Fund grow by way of a steady rise in the price of the underlying large-cap stock and the dividends declared by the large-cap company. If you are a conservative investor who plans to stay invested for at least 5 years or more, then these funds would be an ideal opportunity for you to accumulate wealth over the long term. Additionally, these funds may also form the core of your equity portfolio to achieve modest returns at relatively less risk.

How can I assess Large Cap Funds?

You can assess Large Cap Funds using a number of financial parameters, starting with your financial goals, risk tolerance, and investment horizon. Given below are some of the additional factors that can help you to analyse the suitability of a Large Cap Fund:

1. Examine the history of the fund house:

Have a look at the track record of the fund house before shortlisting a mutual fund. Fund houses with a long investing history are assumed to have become adept at manoeuvering themselves amidst market volatility so as to keep the fund returns in line with the expectations. Additionally, it is indicative of the management of the fund house being stable. Look for fund houses that have been operating in the large-cap segment for at least 5 years. Remember not to get attracted to a fund house that has given extremely high returns in the short-term without confirming its consistency. 

2. Assess the performance of the mutual fund:

A look at the returns of a fund reveals a lot about its ability to generate sufficient returns that would be good enough to achieve your specific goals. You may want to compare the Sharpe Ratio of peer funds to arrive at a fund that delivers superior risk-adjusted returns. Sharpe Ratio is a financial ratio that explains the extra returns that a fund generates for the extra risk taken. Along with this, you may also check the consistency of such returns.

3. Analyse the expense ratio of the fund:

You can compare the competitive Large Cap Funds on the basis of their expense ratio. This will give you an idea of the overall operating efficiency of the fund. A higher expense ratio is known to put downward pressure on the fund returns, hence, you will be better off investing in a direct plan of the Large Cap Fund that has a relatively lower expense ratio. Direct plans of mutual funds can help you to earn up to 1% higher returns than regular plans.

Best Large Cap Funds 2020

Large Cap Funds are considered to be the least risky when compared to Small Cap Funds and Mid Cap Funds. This makes Large Cap Funds suitable for investors who want to grow wealth without exposing their portfolio to too much investment risk or volatility. Enlisted here are the best Equity Large Cap Funds for 2020.

How to Invest in Large Cap Funds via Paytm Money?

Investing in Large Cap Funds is a smart way to park your funds for your long-term financial goals. The Paytm Money app and Paytm Money website offer only the top-rated funds for you to pick from. Here are a few steps that you need to follow to invest in Large Cap Funds:

Step 1: Download the Paytm Money app to complete your KYC & become investment-ready within minutes

Step 2:  You can start investing both on our website and App. On the home screen of the App, tap on the ‘Equity Funds’ given in the ‘Get Started with Mutual Funds’ section. 

Step 3: On the ‘Equity Mutual Funds’ page, tap on ‘Large Cap Funds’ followed by tapping on a fund of your choice.

Step 4: Tap on ‘Invest Now’ via SIP and enter the amount of investment. Tap on ‘Proceed to Payment’.

Step 5: Make payment using Auto Pay, Netbanking or Debit Card. Tap again on ‘Proceed to Payment’ to complete the transaction.