Best Large Cap Mutual Funds

Large cap mutual funds invest in the top 100 companies based on market capitalization. Most often, large cap companies are market leaders with a well-established clientele/consumer base for its products and services. This allows them to handle economic slowdown better as compared to mid and smaller sized companies. This is also highlighted by their tendency to experience lower volatility. This reduces the quantum of risk with respect to large cap funds.

Extensive financial track records and a published history of their performance across the market and economic cycles offers investors better insight into the strength of the portfolio.

Large cap mutual funds are perfect to form the core allocation of every investor’s portfolio and should be invested with the intent to make long-term capital gains. While the risk quotient may not be high, investors will have to wait for a gradual upswing in the market conditions to reap returns. Large cap mutual funds are not a choice for investors looking for quick returns.

The real growth in an investor’s wealth comes from staying invested for the long term, usually more than 5-7 years. However, investing lump sum when the markets are high (usually, it means the large cap stocks are also high) exposes investors to a likely correction and drop in their portfolio value. If an investor requires money during corrections and ends up selling, he could experience a real loss and certainly poor returns even though he has invested in a large cap fund.

It is important that investors are able to manage their fear and stay invested. Maintaining a diversified portfolio, across asset classes helps in staying invested in the market.

Portfolio Quality

When you invest in a mutual fund, what you are really buying is the stock portfolio of that particular fund. It’s then common sense that the first thing you check is its portfolio quality. And how it compares with other large cap funds in the market.

What is the proportion of risky companies? What sector is the fund focussing on? Since safety is of primary importance when investing in a large cap fund, you’re better off staying with the best quality funds.

Rolling Return

A quick google search for the best large cap funds to invest in" will lead you to many sites recommending top-performing funds based on their performance in the past 3, 5 and 10 years. However, this method could sometimes be inadequate and misleading.

A better way to assess a fund’s return performance is to look at rolling returns across different time periods, say 3 or 5 years. This removes the starting/ending point bias present in point to point past performance used across the industry.

Consistent Performer

Past performance is no guarantee for the future. Thus, choosing a mere top past performer is unlikely to be a winning strategy.

However, a manager who has outperformed his benchmark across market cycles is more likely to do so in the future too. Avoiding funds with poor return consistency will take the investor a step closer to building a winning portfolio.

Low cost

Every fund charges you with a fee to manage your funds, more commonly known as the expense ratio. So among the funds that fulfil your other criteria, choose the fund with the lowest expense ratio.

Apart from this, there are other hidden costs in an MF such as brokerage and impact cost. These can be reduced by choosing a fund that churns the portfolio less frequently. Because, ultimately, these costs are to be borne by the investor, and they account for a compromise in returns.

Mirae Asset Large Cap Fund

The Mirae Asset Large Cap Fund predominantly invests in large cap companies (within the top 100 according to market capitalisation). The Fund displays a certain flexibility when it comes to investments, showing interest across various sectors of the industry, focusing specifically on high quality businesses but also ensuring the right price over the holding period.

For more details click on MoneyWorks4me’s assessment of Mirae Asset Large Cap Fund .

Axis Bluechip Fund

The scheme invest largely in large cap companies. The fund has done well since current Fund manager, Shreyash Devalkar, joined the fund house in November 2016. The fund manager’s focus has been on quality and growth companies i.e. selecting companies with high return on equity (RoE), revenue and margin growth, and market penetration.

For more details click on MoneyWorks4me’s assessment of the Axis Bluechip Fund .

Nippon India Large Cap Fund

This fund is ideal for investors looking at a holding period of three to four years, after which the fund stands to yield high returns. But investors must also be prepared for adversity as this portfolio is prone to moderate risks. Apart from investing in equity and equity-related instruments of large capital companies, this fund also seeks to generate returns by investing in securities, InvITs, and REITs.

For more details click on MoneyWorks4me’s assessment of Nippon India Large Cap Fund .

SBI Bluechip Fund

A suitable fund for those investors that aren't willing to take too much of a risk, while also expecting a reasonable rate of returns. This is an ideal fund to invest in with medium-term goals focusing on wealth creation or planning a comfortable retirement.

For more details click on MoneyWorks4me’s assessment of the SBI Bluechip Fund .

Invesco India Large Cap Fund

Unlike most large cap funds, this equity fund is diversified across market capitalizations. The fund’s managers take a contrarian approach and look for undervalued companies for investment. Thus, the fund is usually faced with short term underperformance but adds significant value over a market cycle in the long term.

For more details click on MoneyWorks4me’s assessment of the Invesco India Large Cap Fund.

You need to avoid the common errors that lead to losing capital in markets, by answering few important questions:

1. 1. Do I have a long enough time horizon required for equity investing?
2. 2. Does the Mutual Fund I choose suit my risk profile?
3. 3. Do I understand what I am buying or am I blindly investing in a Fund on the insistence of my friends, acquaintances or Mutual Fund Distributors (who earn commissions on what they sell to me)?
4. 4. Am I over-exposed to one Fund or one type of Funds? Do I know if I have a good combination of Funds?

Ask questions and learn more about investing in Mutual Funds because ignorance is the biggest risk. And, you probably have a few decades of investing to do, so investing your time in learning about investing is the best investment you can make!

While it’s true that Mutual Funds in India can be a good investment option, you shouldn’t forget that they have an inherent market risk associated with them. Risks are inevitable, because we are dealing with estimated values in the future, and the future remains uncertain. Understanding risks will help you take action to control and manage them. And, then your expectations can be adjusted to do justice to the risks you have taken.

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