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Large Cap Funds

Large Cap funds are the funds which invest a larger proportion of their corpus in companies with large market capitalization.

What is Large Cap Fund?

The large cap funds are mutual fund schemes that invest mostly in the large companies. The market presence of large cap funds is very strong and the companies with a market capitalization value of more than $10 billion are considered to be as large cap companies. As compared to mid and small cap funds the volatility of large cap funds is less. Large cap funds also helps in reflecting the state of economy. The returns offered by the large cap funds are comparatively less than mid and small cap funds due to stable nature of funds.

Why Large Cap Funds?

1. Large – Cap Stability: One of the most important advantage to add large cap stocks to an investment portfolio is the stability they provide in it. As the companies are so large and have a good reputation with the consumers that as a result help them not to face any economic circumstances rendering them insolvent and also forcing them to stop producing revenue completely. Compared to small and mid cap funds they are considered more stable and the investors can invest with less lesser risk.

2. Dividend Payouts: The second advantage to invest in large cap companies is the potential for steady dividend payments. As such companies are already well established in the market, the stock prices are not typically slated for high rates of growth over time. A stagnant stock price and not much capital appreciation can be seen for the investors. Even though there is lack of rapid growth in terms of stock price, the large cap companies do pay dividends to compensate shareholder. The returns for large cap investors can be really impressive when they are added to the performance calculation over time.

3. Research and Valuation: The creditors and investors can easily obtain research on company operations and profitability levels due to long business tenure. The shareholders and investors should be provided financial statements by these large cap companies allowing in determining the company’s worth regarding investment. In order to determine the company’s accurate valuation, a proper study of company history and financial statements together with current business activity must be done.


Factors Influencing Large Cap Funds:

Available data for evaluation:

Due to long tenure of business of the large cap companies, the investors can acquire adequate data to have a look at the performance over the years. The internet and other news media can be some good sources to attain company information. Such analysis can give a good idea of the company’s worth regarding investment to the investors.

Earning capacity of the companies:

Companies should be capable of generating good earnings, as the fortune of its investor’s is also dependent on the same. Some of the factors like brand equity must be paid attention it is very important.

Quality of management and business:

A good amount of experience and entrepreneurial spirit is required to manage a large cap company in order to maintain a constant and sustainable growth in the company operations. Two essential parameters needed to choose a stock while investing are quality of business and management. The right decisions that are made which results in great performance lead to growth of the company.

Dividend Payouts:

A large cap company provides steady dividend payouts which result in compensating the shareholders despite in lack of short term growth. When these companies provide payout dividends regularly they are considered the favorite stocks of investors for a long period of time.

Sync with the economy:

The economic scenario can be represented by the performance of the large cap companies. On the market indices the investments of these companies are reflected. These companies are considered as risk diffusers and are rarely affected by volatility. Even though these quality large cap stocks are at higher price still they are beneficial in the rising economy also for a long term investment.

Stability of business:

As large cap companies have already built a reputation in the market over the long tenure of business they are less affected by some hazardous circumstances in the economy. The greatest benefit of investing in such companies is to get the stability in the portfolio. A good amount of trusts can be build in between the company and the investor enabling high investments in the stocks.