What is a large cap mutual fund?

what is large cap mutual fund
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What is a large cap mutual fund?

Large-cap funds are equity funds that invest in large-cap stocks, which are stocks of blue-chip companies with a huge market capitalization. These companies are recognized as well-reputed and have long term track records. Also, such companies have a better chance of weathering economic downturns and recessions.

Why should you invest in large cap mutual fund?

Investing in large-cap mutual funds has several benefits. Some of the benefits of large cap fund are mentioned below:

  • Stability: Since large-cap companies are well-established and financially sound, they offer more stability than mid-cap or small-cap companies. The chances of established companies facing dissolution due to financial adversities are less compared to other than large cap stocks.
  • Diversification: Usually, large-cap funds invest in niche companies from multiple sectors. This opens the door for diversification of the portfolio. Moreover, an investor doesn’t need to invest in each sector or monitor the performance regularly as fund managers constantly keep track of the portfolio.
  • Higher Liquidity: Compared to other stocks, large-cap stocks are traded in high volume; hence they offer ample liquidity.
  • Access to information: It is easier to obtain details about the operations, financial statements, and profitability of large companies than mid or small companies. Easy access to information helps in making an informed investment decision.
  • Long-term growth: Since stock prices of large companies don’t fluctuate as much as mid and small caps, large cap funds offer better stability and potential capital appreciation in the long run.

How large cap mutual fund work?

A fund manager accumulates money from various investors and invests it in stocks of large companies from multiple sectors. Several factors, like the company’s financial performance, management, industry outlook, and economic conditions, are also taken into consideration before investing. The returns on large-cap funds could be in the form of capital appreciation.

Who should invest in large cap funds?

Since large cap funds seek to provide investors with a relatively stable and consistent return on their equity investments, it can be a good option for risk-equity investors.

Large-cap mutual funds are suitable for investors looking for:

  • Stability
  • Long-term growth
  • Low volatility as compared to mid and small cap funds
  • Diverse portfolio

Advantages of investing in large cap mutual funds

Relative stability: Since these funds invest in well-established companies with a variety of revenue streams, they are less susceptible to sudden market downturns. These companies typically have inherent robustness against market volatility because they are leaders in their fields.

Returns: Large cap funds have a history of producing respectable long-term returns, despite the fact that they may not produce significant short-term returns. Due to their track record of performance, large cap funds may be a good option for long-term capital growth.

Liquidity: The shares of large companies enjoy a considerable trading volume in stock exchanges, ensuring high liquidity. This implies that investors can execute buy or sell orders without inducing substantial price oscillations.


Large-cap mutual funds are taxed in the same way as other equity oriented mutual funds. While short-term capital gains (STCG) on large-cap funds are taxed at a flat rate of 15% (plus applicable surcharge and cess), long-term capital gains (LTCG) up to Rs.1 lakh are exempted from taxation. However, if the long-term capital gains are more than Rs.1 lakh, then they are subject to a 10% tax rate without indexation (plus applicable surcharge and cess). It’s recommended to consult your tax consultant for better understanding of the same.

How to invest in large cap funds:

Technology and digitization have made it easy to invest in large-cap funds. Here’s how you can go about it.

  • Choose the right large-cap fund: Choose a large cap fund that meets your investment requirements. Comparative analysis of different large cap funds can help in making the right choice.
  • Open an account or folio: Now, open an account or folio with a mutual fund company with the help of a distributor or by visiting the fund house’s website. The form needs to be filled with some basic personal information, KYC, and details about how you will fund your account.
  • Fund your account or folio: You can fund your account or folio by either making a lumpsum investment or by setting up a systematic investment plan.
  • Monitor your investment: Monitor your investment periodically. The performance of the fund can be tracked online or by reviewing one’s account statements.

For those investing in mutual funds for the first time, large-cap funds are a good way to begin. As most of the corpus of these funds is invested in big, reputed companies, the performance is relatively stable during volatile market situations as compared with mid cap funds or small cap funds. Such funds also offer diverse portfolios and potential capital appreciation in the long term. However, before investing, one should always consult an experienced financial advisor to make a sound decision.


Should I invest in large cap mutual funds?

Investing in large-cap funds can be a suitable option for investors who are looking for relatively stable and less risky investments as compared to mid and small cap funds. Large-cap mutual funds invest in large, well-established companies that are expected to perform well over the long term.

How long should I stay invested in large cap mutual funds?

Investing in large-cap mutual funds is a long-term strategy. The indicative horizon should be five years and above to reap the benefits of long-term growth.

Is it good to invest in large cap mutual funds?

Large-cap mutual funds can be a good investment option for investors who are looking for relatively stable and less volatile equity investment compared to mid and small cap funds. Large-cap companies are usually well-established and have a track record of performing well over the long term.

How much should I invest in large cap mutual funds?

The amount you should invest in large-cap mutual funds depends on your investment goals, risk appetite, and financial situation. Additionally, you should also consider your other financial goals, such as saving for emergencies, before investing in mutual funds. You should check with financial advisor before undertaking such an investment.

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.