Why choose large-cap stocks?
Large-cap stocks usually belong to large, established companies and are safer investments than small- or mid-cap stocks. Since large-cap companies are so large, they are less likely to encounter situations that force them to completely cease operations.
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.
A high market cap signifies that the company has a larger presence in the market. Larger companies may have less growth potential than start-up firms, but established companies may be able to secure financing cheaper, have a more consistent stream of revenue, and capitalize on brand recognition.
Small-cap stocks and large-cap stocks both come with their own pros and cons. While small-cap stocks can generate higher returns, they also have a higher risk profile. Conversely, large-cap stocks witness smaller growth but are more stable. Investors should consider investing in both for a balanced portfolio.
Greater financial security: A large capital base can help individuals or businesses withstand market fluctuations and unexpected financial challenges. Reduced borrowing costs: A large capital base allows individuals or businesses to reduce borrowing costs by obta.
Drawbacks: Slower growth: Large-cap stocks may not offer the same growth potential as smaller companies, limiting potential capital appreciation.
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.
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.
When investors select their stocks, they must decide between risk and reward. Large-cap stocks usually belong to large, established companies and are safer investments than small- or mid-cap stocks.
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.
Who should invest in large-cap?
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.
Large-cap stocks include many of the best-known companies in the world, and although they might not be as exciting as smaller companies with high growth potential, they are typically a safer investment.
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.
The small firm effect theory posits that smaller firms with lower market capitalizations tend to outperform larger companies. The argument is that smaller firms typically are more nimble and able to grow much faster than larger companies.
The Defensive U.S. Large Cap Core Equity Strategy invests in structured investments with leveraged upside (within a range of performance) and a minimum 10% downside buffer (the “leveraged upside securities”). An investment in the leveraged upside securities involves significant risks.
The best time to buy a stock is when an investor has done their research and due diligence, and decided that the investment fits their overall strategy. With that in mind, buying a stock when it is down may be a good idea – and better than buying a stock when it is high.
Growth Potential: While large-cap stocks may offer stability and income, they may not have the same growth potential as smaller companies. Investors looking for high-growth opportunities may need to consider smaller-cap or mid-cap stocks that have greater potential for expansion but also come with higher risks.
Large-Cap Funds:
Large-Cap Funds are considered relatively more stable because the companies are typically reputable, trustworthy, and well established in the market. These are mostly market leaders and well-known brands with a good performance track record over the medium to the long-term investment horizon.
The 120-age investment rule is a theory directing investors to keep a higher allocation of riskier investments for longer. This approach helps build more wealth over time, which is critical for the increased average lifespan of retirees.
As far as finding the right percentages of stocks goes, one rule of thumb you can use is to subtract your age from 110. If you're 65, that brings you to 45 -- meaning, you can consider keeping 5% of your portfolio in stocks at that age. If you're 70, you'd look at sticking to 40% stocks.
What is the best asset allocation for a 55 year old?
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.
| 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% |
Blue-chip funds, which focus on solid, financially strong corporations, give consistent and predictable returns, making them ideal for long-term investment strategies. Large cap funds and index funds, on the other hand, provide growth potential by investing in established companies that are publicly traded.
Aggressive investors: An aggressive investor can consider about 50-60 percent allocation to largecaps, 15-25 percent to midcaps and the remaining 15-25 percent to smallcaps.
We classify large-caps as the smallest number of stocks that can together equal 70 per cent of the total market capitalisation of the BSE. These are further classified as Giant cap (50 per cent) and Large cap (20 percent).
