Are large-cap stocks stable?
Risk and Volatility Levels
Lower risk: Compared to mid-cap and small-cap funds, large-cap funds invest in well-established companies with larger market capitalizations. These companies tend to be more financially stable and resilient to market fluctuations, offering a lower overall risk profile.
Large-cap stocks are generally considered to be safer investments than their mid- and small-cap stock counterparts because they are larger, more established companies with a proven track record. Some of the biggest names in business are large-cap stocks – Apple, Microsoft and Alphabet, for example.
Key Takeaways. Large-value stocks refer to those companies that are both large-cap (greater than $10 billion in market capitalization) and also value stocks. Large-value stocks are often mature and stable companies that pay regular dividends, attractive to lower-risk value investors.
Due to their size of operations, large-cap companies are better-equipped to ride out challenging economic conditions compared to smaller-cap companies. As a result of these features, the share prices of large-cap companies tend to be relatively more resilient than smaller-cap stocks.
Large-cap funds are less risky than small and mid-cap funds. Small and mid-cap funds have higher growth potential than large-cap funds. Large-cap funds are good for conservative investors. Mid and small-cap funds are suitable for medium-risk takers to aggressive investors.
Large-cap stocks are a good option if you want to invest in a company's stocks by taking less risk. These stocks are less volatile than mid-cap and small-cap stocks, and lower volatility makes them less risky.
Drawbacks: Slower growth: Large-cap stocks may not offer the same growth potential as smaller companies, limiting potential capital appreciation.
In general, large-cap stocks tend to be less volatile than small-cap stocks. This is because small-cap stocks generally represent younger, less-established companies that do not have the financial resources of larger companies and are thus more vulnerable to a downturn in the economy.
| Scheme Name | Plan | 2Y |
|---|---|---|
| PGIM India Large Cap Fund - Direct Plan - Growth | Direct Plan | 17.02% |
| JM Large Cap Fund - (Direct) - Growth | Direct Plan | 22.69% |
| HSBC Large Cap Fund - Direct Plan - Growth | Direct Plan | 18.29% |
| ITI Large Cap Fund - Direct Plan - Growth | Direct Plan | 21.30% |
How much of my portfolio should be in large-cap stocks?
Balanced Investor: A balanced investor should consider having some exposure to small-cap stocks. The remaining 25–30% can be divided between midcaps and small-caps, with roughly 70–75% allocated to large caps.
- DaVita Inc. ( ticker: DVA)
- DraftKings Inc. ( DKNG)
- Extra Space Storage Inc. ( EXR)
- First Solar Inc. ( FSLR)
- Gen Digital Inc. ( GEN)
- Microsoft Corp. ( MSFT)
- Nvidia Corp. ( NVDA)
- SoFi Technologies Inc. ( SOFI)
If you are a risk-averse investor but want to benefit from equity investments, then large cap equity funds are the best option available to you. Since these schemes invest in financially strong large cap companies, they can withstand a slowdown in the markets.
The Large Cap Value Strategy exploits market inefficiencies to identify strong businesses at attractive valuations that it can hold for long time periods.
Investing in small caps during recessions has generated superior investment returns, according to our back-testing of the data to the late 1980s (see Table 1, below).
While the very largecap names seem to be more reasonably valued, as we go down the market cap quality and risk curve, the extent of overvaluation keeps on increasing and you cannot even understand what is happening in some of the midcap and smallcap stocks.”
Choosing between Large-cap and Mid-cap Mutual Funds depends on your risk tolerance, investment horizon and financial goals. Always consider the Large-cap vs Mid-cap factors before investing. Large-cap Funds offer stability, while Mid-cap Funds offer growth potential with higher risks.
Large-cap stocks are usually well-established and dominant companies in their respective industries as their market capitalisation is over Rs. 20,000 crores. The term “cap” in large-cap refers to market capitalisation.
The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and covers approximately 80% of available market capitalization.
In general, small-cap stocks are thought to be more volatile than big-cap stocks and thus provide both greater risk but also opportunity. This is because big-cap stocks are often larger, more mature companies that are not seeking aggressive growth.
What are the 5 most volatile stocks?
| Symbol | Volatility | Price |
|---|---|---|
| CASA D | 76.28% | 0.0350 USD |
| HUBC D | 75.69% | 1.04 USD |
| TVGN D | 73.22% | 3.40 USD |
| EIGR D | 70.27% | 2.26 USD |
Bond Mutual Funds
The three types of bond funds considered safest are government bond funds, municipal bond funds, and short-term corporate bond funds.
Typically, investing in large-cap companies is used as a core long-term investment strategy within a portfolio because of their stability and dividends. Financial advisers usually suggest diversifying an investment portfolio by including small-cap, mid-cap, and large-cap stocks.
As you reach your 50s, consider allocating 60% of your portfolio to stocks and 40% to bonds. Adjust those numbers according to your risk tolerance. If risk makes you nervous, decrease the stock percentage and increase the bond percentage.
For most retirees, investment advisors recommend low-risk asset allocations around the following proportions: Age 65 – 70: 40% – 50% of your portfolio. Age 70 – 75: 50% – 60% of your portfolio. Age 75+: 60% – 70% of your portfolio, with an emphasis on cash-like products like certificates of deposit.
