In the stock market, there are periods where the large-cap funds are not the best performers. However, currently, the large cap funds category is topping the return chart in the last one year. Most investors had written this category off about year and a half ago basis performance. However, as the economic slowdown engulfed the market the flight for safety took precedence. In times of economic slowdown, the large-cap funds/stocks become a better investment option. The major reasons to invest in large cap stocks are mentioned below:
1. Large Cap companies are stable
2. Large Cap companies are likely to be leaders in their respective businesses
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3. Relatively stable during economic slowdown compared to mid and small-caps
4. These companies also pay regular dividends
As a cautious investor who intends to avoid high volatility and too much risk, one must consider investment in large-cap mutual funds. Sebi, with an intend to simplify the mutual funds' investment for investor came out with product categorization norms. Under this mandate the large cap mutual funds must invest 80% of the scheme corpus in the top 100 companies by market capitalization.
The performance of Large-cap funds is mentioned below. This performance is as on November 26, 2019
The best performing fund has delivered a staggering 20.73 per cent return in the last 1 year and has outperformed the category average of 12.52 per cent by 8.21 per cent. In the 3-year time frame, the category performance is 12.05% while the best performing fund delivered 19.49 per cent outperformance of 7.43 per cent.
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Large cap funds should be the cornerstone of an investor’s portfolio. The portfolio allocation to large-cap may vary basis age of the investor and risk appetite. The large-cap funds have helped a lot of investors create wealth. The debate pertaining to active large cap versus passive large cap funds would continue. However, as a smart investor one can judiciously allocate between these two strategies.
