A beginner's guide to investing in large-cap mutual funds

beginners guide to invest in large cap fund
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Investors, especially those new to the world of finance, can often feel daunted in the face of multiple confusing choices. It’s true – selecting the right schemes for investments is never easy. However, large cap mutual funds can serve as a good starting point for your financial journey.

Let's try to understand the complexities of large cap mutual funds and equip you with the required know-how to confidently steer towards wealth creation. This article will be your beginner’s guide to invest in large cap funds.

  • Table of contents
  1. What are large-cap mutual funds?
  2. Why should you invest in large-cap funds?
  3. How beginners can invest in large cap fund?
  4. FAQ

What are large-cap mutual funds?

Large cap mutual funds are equity funds that allocate a significant portion of their total assets to companies with substantial market capitalisation. These companies boast a good reputation and a proven history of creating wealth for investors over an extended period. According to SEBI’s classification, large cap companies are ranked from 1 to 100 based on full market capitalisation. As a result, large cap funds are recognised for providing consistent dividends and the gradual appreciation of capital.

Additionally, these schemes usually carry a lower level of risk compared to small cap or mid cap schemes, ensuring a relatively stable return potential. Thus, large cap funds can be a suitable choice for investors with a relatively low risk tolerance for equity volatility and a focus on long-term investments.

Why should you invest in large-cap funds?

Risk mitigation: Unlike the fluctuating fortunes of smaller companies, large cap funds offer relative stability and resilience. The diversified portfolio helps during the time of market volatility, ensuring your financial journey is comparatively smoother across market cycles as compared with investing in mid caps or small caps funds.

Long-term growth: Large cap companies are like seasoned veterans that have weathered countless economic storms and emerged stronger each time. By investing in large cap funds, you tap into their well-established market dominance and benefit from their proven track record of consistent, long-term growth.

Professional expertise: Like other mutual funds, even large cap funds are managed by experienced fund managers with a good understanding of the market. These fund managers meticulously choose the well-performing companies for the portfolio, allowing you to benefit from their expertise.

Liquidity and convenience: Life happens, and sometimes you may need to access your invested funds at short notice. Thankfully, large cap funds offer high liquidity, allowing you to readily buy or sell your units at NAV, subject to exit load. This flexibility offers peace of mind knowing your financial resources are accessible when needed.

How beginners can invest in large cap fund?

Now, that you have an understanding of what large cap funds are, let's transform theory into action. Investing in large-cap funds is surprisingly accessible and straightforward:

Select the fund: Conduct thorough research and compare different large cap funds to find one that complements your risk tolerance and investment goals. Consider factors like credibility of the fund house, fund management expertise, etc. Remember, past performance is not a guarantee of future success, so research diligently before making your choice. You can seek the help of a distributor for selecting a suitable fund.

Make the investment: Decide on your initial investment amount. Don't let the numbers intimidate you. Most platforms offer convenient online investment options, allowing you to seamlessly start your journey from the comfort of your home.

Be consistent: Consider setting up a Systematic Investment Plan (SIP). Think of it as putting your finances on autopilot. SIPs allow you to invest a fixed amount at regular intervals, nurturing financial discipline and allowing you to benefit from rupee-cost averaging. This strategy smoothens out market fluctuations, ensuring your investments are not subject to the temporary ups and downs.


While large cap funds offer relative stability, the market is inherently unpredictable. Always approach your investments with a long-term perspective, stay informed about economic trends, and diversify your portfolio beyond just large cap funds as your comfort and knowledge grow.


How does a large cap mutual fund work?
These funds invest a large portion of the assets in companies with a large market capitalisation. These companies have a high reputation and a proven track record of performing well across market cycles. Therefore, these funds come with relatively lower risks than mid cap funds and small cap funds.

Who should invest in large cap mutual funds?
Investors wanting to invest in equity mutual funds but seeking lower risks and a relatively stable return potential over a long horizon can opt for large cap mutual funds.

How do you invest in large cap funds?
You can invest in these mutual funds through the official website of the respective companies or through an authorized broker.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.