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Why You Need to Add Large Cap Funds to Your Portfolio?

This article focuses on the concept and importance of the Large Cap Funds, as well as also enumerates who shall invest in them.

The mutual fund industry has expanded remarkably in the past two decades. Many new companies have flooded in and have increased the number of options that the investors have on their deck. However, with such an influx of options, it has become reasonably difficult to identify which funds shall be chosen. The even bigger issue that is faced sometimes is the category to pick, which further makes the investment procedure a bit tricky.

Nevertheless, investing in Large Cap Mutual Funds has always been a good option to create a comprehensive portfolio, both for aggressive as well as conservative investors. While the former can incorporate the flavour of diversification with these funds, the latter enjoy the great risk cover provided by this category funds.

Now, as an investor, it isn’t enough to know which category funds are available in the market. A good investment plan demands a deep understanding of the fund lines that you are interested in, the products that you are thinking of picking up for your portfolio, as well as how long you shall keep yourself placed in the same funds. All of these questions form the base for a rewarding investment plan, and thus we are going to discuss these points in detail in this article.

Understanding Large Cap Funds

As you might already know, mutual funds are broadly divided into two principal categories: Equity and Debt. These two categories are further sub-divided into different types of options to suit different investors needs. Large Caps are one such sub-division of the Equity mutual funds, where the major chunk of the investors money is placed into the stocks of the large, established companies of the market having a market cap of Rs. 20,000 crore or more.

In other words, large cap companies are those who have successfully passed the premature stages of their existence, and have now grown to be the leaders of their particular field. They are relatively much more stable than the mid cap companies in case of volatile market conditions, thus spewing stabler returns overtime. Hence, large caps are a great source to incorporate stability in the portfolio as their stocks do not easily fall prey to turbulent market conditions. The history has it for us that Large Cap companies are too good to fail in the market because it is highly unlikely that they will ever fall short of earning revenue, or will go bankrupt in desperate economic conditions.

To Whom Large Caps Suit the Best?

Investing in mutual funds is always influenced by the individuals investment objectives, their risk tolerance and for how long they are interested in staying invested. Large Cap Funds are an ideal choice for those who want to earn steady profits without getting bruised be heavy risks. Moderate risk takers can also obtain advantage of steady and stable returns by investing in Large Caps.

For novices and first-time investors, Large Cap stocks are a great way to start their investment journey as they are not putting themselves at high risk and even then they are enjoying steady returns. However, it should be noted that even the best Large Cap Mutual Funds in India may not fetch high returns in the times of favourable market conditions, but rest assured your funds will be way too stable in the situations of turmoil.

Something More

While Large Cap Funds are one of the best ways to incorporate stability and earn good returns, it shall be taken care of that you choose only those funds that are capable enough of meeting your objectives. Picking any random fund is not going to be of any help, and instead may slow down the process of covering your objectives if it doesn’t suit your profile. Hence, it is suggested that you do some introspection and find out which kind of investor are you exactly. You can take the help of your fund advisor and even find some really helpful tips on the internet that will speed up the process of your fund selection.

While investing in the best Large Cap Funds will surely be an added advantage to your investment plan, care should be taken that you select something that suits you the best and not what is running the best in the market. So, don’t rush but take some time in figuring out what is apt for youFree Web Content, because in the end it will all be worth it.

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Dishika is a professor of Strategic Financial Management and Investment Banking at Maharashtra University. She also works in close collaboration with MySIPonline in developing useful contents on mutual funds. 

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