Markets at all time highs! What are the benefits of investing in a largecap fund?

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Largecap funds: When stock markets scale new highs, financial planners usually recommend putting money in largecap funds. The stock market is abuzz as the Sensex has hit a record high of 75,000. Financial experts advise first time investors to consider large-cap funds in such a bullish market.
Large-cap funds primarily invest in top 100 companies based on market capitalization, ensuring stability and potential growth.These funds allocate 80% of their assets to well-established companies with a proven track record and strong management teams, making them a reliable choice for investors.
According to regulatory guidelines, a large-cap company refers to a listed company ranked from 1st to 100th on the Indian stock exchanges based on market capitalization. Therefore, for a fund house, a large-cap scheme is required to allocate at least 80% of its assets to large-cap companies, while the remaining 20% can be invested in other companies at the discretion of the fund manager.

What are the benefits of investing in a largecap fund?

Large companies, being more established, attract both local and international investors, leading to greater transparency and availability of information and reports on their performance. They also have better access to funding and top talent, making them resilient in challenging economic conditions.
These companies can attract the best banks and skilled personnel due to their relevant expertise and capacity to navigate challenging economic conditions more effectively than smaller firms. From a stock market standpoint, these companies are considered more stable, offering greater earnings visibility and longevity.
Large-cap funds play a significant role in the Indian mutual fund industry, with 31 schemes managing assets worth Rs 3.04 lakh crore and catering to 13.5 million investors.
These funds offer steady returns with lower risk over a longer investment horizon, making them suitable for conservative investors and those new to the stock market. Financial advisors recommend that beginners start with large-cap funds before exploring other investment options to build a strong foundation.
Financial planners are of the view that conservative investors should focus on large-cap funds while avoiding mid and small-cap funds due to their higher risk levels.



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