WHAT DO YOU MEAN BY LARGE CAP?
Large Cap Equity Mutual Funds is a type of mutual fund that invest in companies with huge market capitalization with equity oriented investment corpus.
Large Cap Equity Mutual Funds invests in companies who are leaders in their industries with proven track record and strong governance.
It provides slow and steady returns to their investors and are the most loved ones.
OK! BUT HOW DO I DETERMINE WHETHER COMPANY IS LARGE CAP OR NOT?
To determine whether a company is a large cap, medium cap, small cap or orange cap (apologies! I am a fan of Indian Premier League), SEBI has provided that large-cap stocks would mean the top 100 companies of the underlying benchmark in terms of full market capitalization.
OK! BUT DOES LARGE CAP COMPANY HAVE LARGE RISK?
That’s the deal. Large Cap Equity Mutual funds are less risky as compared to small cap or medium cap.
OK! THEN IT MEANS LESS RISK LESS RETURN
That is not a correct interpretation. Large Cap Equity Mutual Funds provides good and steady returns and provide better capital appreciation over long term with regular dividend distribution.
OK! THEN HOW LONG SHOULD I HOLD THESE INVESTMENTS?
Investment horizon of five to seven years are recommended to earn steady returns.
OK! SO ARE THERE ANY OTHER POINTS I NEED TO CONSIDER BEFORE OPTING?
Yes Sure! You should always be aware of the pros and cons of investments and for Large Cap Equity Mutual Fund, you should be definitely aware of below points:-
- RISK : They are not risk free. There is always an element of risk attached but in a moderate way and they do not fluctuate aggressively.
- RETURN : Do not expect extraordinary returns from these funds as they are quite moderate.
- COST : Large Cap Funds charge expense named as expense ratio to manage the fund.
- GOALS : These funds can be used for retirement planning as they carry a reasonable risk and helps investors who want to enter the market.
- TAX : Long term capital gain attract tax @ 10% without indexation, if amount exceed 1 lakh.
So all an all, these are pretty nice funds for people like me who likes to sit and enjoy weather (with chai & pakode) outside without having to worry on movements in stock market and mutual funds. And you could brag also that you invested in blue chip stocks 🙂