In 2018, the asset under management (AUM) of the mutual fund industry grew by 13% by November-end, adding Rs. 3 trillion to the asset base. The uptrend is expected to continue in 2019, with SEBI undertaking several additional measures to increase the mutual fund penetration in the country. Large-cap funds offer sustainable returns over long periods of time, and is a popular option for serious players in the market, that aim to buy and hold stocks with a long-term investment perspective.
Investing In Large-Cap Funds
Investing in mutual funds depend on multiple factors such as risk appetite, investment period, investment goals and investment capacity. Large-cap funds provide higher returns than small-cap and medium-cap funds over longer periods, and arent greatly affected by market volatility. Considering the fact that large-cap stocks are invested in companies with large market capitalization (sometimes referred to as blue chip companies), with a proven track record and having a strong presence, these funds provide stable returns in a dynamic market.
According to the data provided by Value Research, large-cap schemes have witnessed returns of 11.5%, more than multi-cap funds (8.22%) and mid-cap funds (4.8%) last year, with several large-cap funds often outperforming their benchmarks over the past few years.
The
large-cap mutual funds are stable, and the low volatility enables them to
withstand bear markets. Furthermore, the large-cap schemes ensure stable
year-on-year growth, thus reducing the risk of investment.
Large-cap funds also pay regular and steady dividends, ensuring stable cash inflow in a dynamic market. Considering the fact that the stock prices of these blue-chip companies are well established, and do not see sharp fluctuations during the investment period, the large-cap funds ensure regular dividends to the investors. Furthermore, while these funds may underperform, they average out in the long run, unlike small and medium-cap funds. Over the investment period, the dividends add up to significant returns on your investment, making large-cap funds an attractive investment option for the investors.
It is also easy for investors to determine the current valuation of large-cap companies through information that is readily available, regarding the companies activities over the previous years. These companies have a long tenure, and information about their profit margins and operations are accessible to the investors. This allows potential investors to make informed decisions, while the companies financial statements serve as strong indicators of their growth. The small and medium-cap companies however are relatively new, and extensive information is not readily available for the investors.
Furthermore, large-cap companies also provide a variety of investment options for the investors. Considering the companies have a strong presence in the market, and have an established foothold enables them to provide investor-friendly options to maximize their earnings.
In May 2018, the total assets in the Exchange Traded Fund (ETF) crossed $5 trillion in the global market. Considering the fact that the large-cap companies are not greatly affected by the ups and downs of the market, they remain an attractive investment option for the investors. This also ensures steady returns for the investors over the long run, who have a low-risk appetite and are interested in stable investment.