Large Cap Mutual Funds Get Useful Information for Investing in Mutual Funds |
Posted: July 27, 2017 |
You must have noticed terms like large-cap funds, mid-cap funds and small-cap funds in various mutual fund advertisements. But do you know what they are? The term ‘cap’ refers to market capitalization or the company sizes like large, medium and small. As you will learn in this article, the sizes of the companies are one of the most important criteria for investing in the mutual funds since each size brings along with it unique opportunities and risks. Let us now check what opportunities and risks we come across in large-cap mutual funds. What are large cap funds? The mutual funds that invest in the companies with large market capitalization are often labeled as large cap funds. These funds are usually the old players in the market with a brilliant track record of generating a consistent wealth for the investors slowly and steadily over a long term. What are the benefits of investing in large cap mutual funds? The primary advantage of investing in this kind of fund is you are less likely to lose your money. Large cap funds by and large invest in blue chip companies with large market capitalization. Hence, they are more stable as compared to mid-cap and small-cap funds. Even though the share price of this fund is usually on the higher side yet it is known for offering steady returns. While this fund always looks for capital appreciation, it always invests its investible share in blue-chip companies which have a higher potential for growth with low debt: equity ratio. Some of the popular names of blue chip companies that we often come across on the Nifty Index and Sensex are Bharti Airtel, HDFC, Reliance Industries and Hindustan Unilever Limited. So, owing to all this reason, large cap funds are less risky than the other sizes of funds and reap long-term benefits for the investors. Things to check while investing in the large cap mutual funds: Track the past performance: Before you finalize your investment decision, analyze the performance of the fund in last 3 to 5 years. If the fund has a brilliant performance record, then it is likely to be beneficial. Determine investment objective: Every investor gets KIM (Key Investment Memorandum) based on the mutual fund scheme he/she chooses. It is important to read and understand it as it states investment objective clearly. KIM offers other additional information as well such as portfolio composition, total expenses, assets under management etc. Risk-appetite: Analyze risk-appetite before taking a plunge into the large cap mutual funds investment as in how much loss you will able to digest. This is important for determining the amount you should invest in the fund. Find a reputable fund manager: Fund manager is a person or company who manages your fund. Verify the background and check credibility before hiring the services of a fund manager.
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