What Is Large Cap Mutual Fund?

Mar 12th 2024
Mutual Fund

What Is Large Cap Mutual Fund? Selecting the best equity mutual funds might be difficult for investors. It might be challenging to locate the ideal stock selection, a capable fund manager, and a successful fund. When investing in equity funds, market capitalization is a crucial factor. What is a large cap mutual fund? It may be viewed as the company's size, to put it simply. You may assess the advantages of investing in the firm and detect potential hazards by analyzing the market capitalization.

Based on the market capitalization of the firms they invest in, equity mutual fund schemes are divided into several groups. Large-cap funds, mid-cap mutual funds, small-cap mutual funds, and multi-cap mutual funds are the categories used. Market players, large-cap companies are established. They have a decent reputation and are classic brands. Consequently, these companies have reliable corporate management and a solid reputation. These businesses are also referred to as blue-chip firms.

To assist you in beginning to invest in these plans, let's examine large cap mutual funds and their advantages.

Who Should Invest in Large Cap Funds?

For people who need to use their equity assets wisely yet don't want their returns to fluctuate over time, what is a large cap mutual fund? Large Cap funds can weather weak markets since they are recognized for being financially robust.

From the perspective of an investor, large cap funds provide a type of constancy that is much-needed for your investment profile; in fact, you may even consider shifting the focus of your investments to revolve primarily around them as part of your investment portfolio.

But one issue that might develop, even with the greatest Large Cap funds, is that they can fall short of market return expectations when compared to mid-cap funds.

Mutual funds that specialize in high market capitalization corporations invest a larger percentage of their assets in these businesses. What is a large cap mutual fund? These are well-known businesses with a strong track record of generating money. Large Cap Funds produce consistent dividend income for its investors over an extended period of time.

The constant compounding of investors' wealth is aided as a consequence. In compared to small-cap or mid-cap funds, these funds are low-risk. Therefore, if investors have a limited tolerance for risk, they might profit from these products' steadier returns. As a result, these programs have a long-term investment horizon.

Benefits of Investing in Large Cap Mutual Funds

Now, let’s get to know the major pluses of investing the money in large cap mutual funds.

  • Stability in investment

Large-cap firms have strong financial standing. They continually record growth, have strong business ideas, and bring in money. Because of their consistency, large-cap funds generate reliable income. As a result, large-cap businesses seldom experience solvency owing to economic conditions. Their effectiveness is not affected by market movements. They provide steadiness to your portfolio as a result. Additionally, big businesses declare a substantial dividend. This aids in your portfolio's continuous wealth building.

  • Sound investment decision

Information about large-cap firms is simple to find. As long-standing industry leaders who have performed well, their knowledge is easily accessible. Access to information about their business operations, profitability, and even financial statements, is simple. They are a stock worth investing in because of their openness. Before choosing an investment, investors may readily collect and analyse the data.

  • Improved capital appreciation

Blue-chip firms are where large-cap mutual fund schemes spend their capital. These businesses provide promising profits due to their strong performance and consistent earnings. Large-cap company stock prices don't change all that much. As a consequence, they provide investors with capital growth over time.

  • High liquidity

Large-cap equities stocks have a plenty of liquidity to offer. Investors can readily sell their whole holdings in a down market. The stock prices are not significantly impacted by market movements, which limits any large losses. During periods of market volatility, liquidity is essential. In order to maximise profits, large-cap fund managers often acquire and sell high-cap stocks.

  • Easy diversification

Large-cap stocks have the capacity to endure numerous market cycles' ups and downs. They can withstand market volatility and do well during bullish runs. It is a reasonably safe investment choice that can withstand a downturn in the economy. It immediately bounces back without jeopardising company chances.

  • Counters economic slowdown

Your market capitalization diversification is aided by the large-cap mutual funds. You can benefit from diversity because the funds invest in leading businesses across several industries. Your portfolio receives the necessary exposure to each sector automatically. You are not need to keep track of the sector's or stock's performance constantly.

Things To keep in mind while investing in large cap mutual funds

If you are looking to invest in large cap mutual funds, you must need to take into account several things given below.

  • Expense ratio

Like all equity funds, large cap mutual funds have expenses. This is a fund's expense ratio, which guarantees that your money is being properly handled. Higher take-home earnings result from a reduced spending ratio. The fund manager of large-cap equities funds makes money by managing your investment. AUM, or average assets under management, is how the expense ratio is expressed as a percentage. This reflects on the fund's operational effectiveness. The top limit of the expense ratio is 2.50%, as required by SEBI. Large-cap funds' reduced expense ratio and lengthy holding duration aid in making up for their underperformance.

  • Investment risks

Large Cap funds are subject to market risks just like other equity funds are. However, these hazards have a moderate effect on them. When compared to other funds, these funds' Net Asset Value (NAV) volatility are much less severe. To capitalise on their dependability, you might invest in them. These funds could perform worse during a market upswing but better during a downturn. You could think of basing the foundation of your portfolio on them as a consequence. It will significantly increase your financial portfolio's stability.

  • Taxation

Large-cap funds have the same tax treatment as regular equity holdings. When you redeem your large-cap equities funds, you get financial gains. These capital gains are subject to taxation based on the holding period, which is the length of time they were invested. A one-year holding period on an investment makes it subject to short-term capital gains (STCG). Tax on these capital gains is 15%. Long-term capital gains (LTCG), on the other hand, are investments that have a duration of more than a year. The current tax rate is 10%, therefore all capital gains exceeding Rs. 1 lakh are subject to taxation. The indexation benefit is not included in the tax amount.

  • Investment horizon

If you invest for the long term, large-cap equity funds will provide the highest returns. It is advised to hold onto these investments for at least five years. You might then better understand the possible rewards on your investment. When the market declines, the fund may perform very poorly. Over a period of seven years, your returns will average out to be in the 10%–12% area.

  • Financial objectives

Long-term objectives are easily attained with large-cap equity funds. As an investor, you may profit from these funds' consistent returns while still exposing your portfolio to manageable risk. During a market downturn, these funds prevent fund value from eroding. These funds are excellent for building wealth to accomplish objectives. You can invest in these funds to help plan costs for retirement, child marriage, and further education. If you are a novice investor seeking secure exposure to the stock markets, it is perfect for you. However, you need to be cautious of the dangers while constructing a portfolio around these products.


1. Can I trust large cap funds?

Large Cap funds are regarded as a somewhat safer form of equity investment since they can weather downturns. Large Cap funds can produce reliable and steady returns with a sound investment horizon.

2. What is the minimum investment amount for large cap funds?

Any mutual fund's finest feature is that it doesn't cost a lot of money to get started investing. Systematic Investment Plans (SIPs) that cost as little as 500 a month are a good place to start. Once these SIPs are activated, your bank account will be automatically debited.

3. Is there no tax on large cap equity funds?

No, the tax rate on profits from large cap stock mutual funds held for more than a year is 10%. Gains up to Rs. 1 lakh, however, are entirely tax-free. The tax rate is 15% if they are invested for less than a year.

The Conclusion

With large-cap mutual funds, you may strengthen your portfolio. To make the most of these money, you must evaluate your long-term objectives and short-term financial need. Before making an investment, it is a good idea to look at factors including the expense ratio and the fund's success in the past. Credibility of the fund manager and the fund house's reputation are other crucial aspects to take into account. To choose a fund that matches your financial objectives and risk tolerance, take into account these variables.



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