What are Large Cap Mutual Funds
Large-cap mutual funds are equity funds that focus on investing in the top 100 companies in India by market capitalisation. These companies are well-established industry leaders, often representing some of the most recognisable brands in the country, with products and services widely used by Indians in their everyday lives.
Advantages of Large Cap Funds
- Gain investment exposure to well-known, established companies that are recognized globally.
- Benefit from strong customer loyalty and resilient business models that ensure consistent profitability.
- Perfect for long-term financial objectives with a time horizon of five years or more.
How Large Cap Mutual Funds Work
Large Cap funds invest primarily in the largest companies globally, defined by their market capitalization. These companies are typically well-established market leaders across various industries, with a strong reputation for consistent performance. Large Cap funds typically invest at least 80% of their assets in these top-tier companies.
Investing in Large Cap funds gives you exposure to companies with a proven track record of delivering solid performance over the medium to long term. As these companies are more established, Large Cap funds tend to experience less volatility than mid-cap or small-cap funds, making them a more stable investment choice.
Who Should Invest in Large Cap Funds?
Investors Seeking Exposure to Global Market Leaders
Large Cap companies are industry giants with successful business models and substantial market share. Investing in a Large Cap fund allows you to become a part-owner in these globally recognized companies, which have a history of stability and growth.
Investors Looking for More Stable Returns
Large Cap funds invest in companies with strong fundamentals—resilient business models, significant market share, and robust financial health. These companies are often better equipped to navigate market downturns and challenging economic conditions. If you want to benefit from the growth of global equity markets while avoiding the extreme fluctuations seen in mid or small-cap investments, Large Cap funds can offer a relatively stable option.
Investors Wanting a Core Portfolio
Large Cap funds are a great option for the core of your investment portfolio. While these funds may not provide the same explosive growth as smaller companies during bull markets, they offer steady, long-term returns with lower risk, making them a solid foundation for a diversified investment strategy.
Taxation on Large Cap Funds
Large Cap funds are taxed the same way as other equity assets. Here’s how it works:
- Short-Term Capital Gains (STCG): If you sell your investment within one year of purchase, the capital gains are taxed at a rate of 15%.
- Long-Term Capital Gains (LTCG): If you hold your investment for more than a year, gains are considered long-term. The first $1,000 (or equivalent) of LTCG in a financial year is tax-free. Any amount above this limit is taxed at 10%, without the benefit of indexation.
How to Invest in Large Cap Funds
Investing in Large Cap funds is easy and can be done through platforms like World Fund. Here’s a simple guide to getting started:
- Sign up online: Register on the World Fund platform via their app or website.
- Select your fund: Go to the Mutual Funds section and choose the Large Cap fund you want to invest in.
- Choose your investment: Decide the amount you want to invest and select your investment method (SIP or lump sum).
Complete your KYC: Submit your KYC details (like your ID and bank information) to finalize your investment.
By following these simple steps, you can start investing in some of the world’s top companies today.
Frequently Asked Questions
How long should I stay invested in Large Cap Mutual Funds?
Where do Large Cap Mutual Funds invest?
By regulation, Large Cap Mutual Funds must invest at least 80% of their assets in stocks of the top 100 companies in India, based on market capitalization. Some funds in this category may also allocate a small portion to mid-cap stocks, with the goal of potentially generating higher returns.
How Risky Are Large Cap Mutual Funds?
Large Cap Mutual Funds invest in stocks, which can make them volatile in the short term. However, over the long term, the risk tends to decrease significantly as the market tends to smooth out fluctuations.
What Returns Can I expect?
Over the past 5 years, Large Cap Funds have delivered an average annual return of 15.85%. Their 3-year and 10-year annualized returns stand at 13.02% and 11.76%, respectively.
Should I Invest in Large Cap Funds?
Large Cap Funds give you exposure to some of the most well-established companies —household names that play a key role in the everyday lives. Due to their size and market dominance, these companies are better equipped to weather challenging market conditions. As a result, Large Cap Funds generally offer consistent returns with lower volatility. This stability makes them an important component of a well-rounded investment portfolio.
