What is A Large-Cap Mutual Fund/Stocks? (2024)

FAQs

What is A Large-Cap Mutual Fund/Stocks? ›

Large cap refers to a company with a market capitalization value of more than $10 billion. Also referred to as “big cap,” large cap describes a class of popular stocks preferred by investors for their stability. Deeper definition. When investors select their stocks, they must decide between risk and reward.

A large-cap company has a market capitalization of over $10 billion. A mid-cap company has a market capitalization between $2 billion and $10 billion, and a small-cap company has less than $2 billion in market capitalization.

Large-cap funds prioritise stability with lower risk, ideal for conservative investors. Mid-cap funds offer a balance, providing growth potential with moderate risk. Small-cap funds hold the allure of potentially high returns, but come with the most significant risk.

Are large-cap growth funds safe? Large-cap growth funds are generally considered to be safer than other stock funds because they invest in large, well-established companies. In investing, however, “safe” doesn't mean risk free.

Large-cap Companies

The SEBI has developed criteria for classifying companies. The top 100 companies listed in the stock market based on market capitalization are classified as large-cap companies. The mutual funds that hold the companies from the large-cap are called 'Large-cap funds'.

Source: Standard & Poor's. Based on annual returns from 2013 to 2023. Large-cap stocks are represented by the S&P 500; mid-cap stocks by the S&P MidCap 400 Index; and small-cap stocks by the S&P SmallCap 600 Index.

Are Large Cap funds safe? Large Cap funds are relatively safer form of equity investments as they are known to withstand bear markets. With a good investment horizon, Large Cap funds can deliver sound and stable returns.

Some examples of large cap stocks include Apple, Amazon, Wal-Mart Stores, and Exxon Mobile. The investing prospectus for the stock or mutual fund you are researching should state if a stock is large-, mid-, or small-cap.

Large-cap stocks are shares of the largest U.S. companies, or those with market capitalizations of $10 billion or more. Large-caps are generally safer investments than their mid- and small-cap counterparts because the companies are more established, but their stocks may not offer the same potential for high returns.

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However, the returns are lower compared to mid-cap or small-cap funds. In the long term (around five to seven years), these funds tend to offer good capital appreciation.

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.

Key Takeaways

Big-cap (large-cap) stocks have a market cap of $10 billion or more. Small-cap stocks generally have a market cap of $250 million to $2 billion. Small-cap stocks shouldn't be overlooked when putting together a diverse portfolio.

Yes, the profits from Large-cap funds are taxable. If you sell the funds within a year, then you have to pay short-term capital gain taxes, which is 15% of the gain. While if you sell them to post one year of investment, then you have to pay long-term capital gain taxes.

What is a Blue Chip Fund? A blue chip fund invests in stocks / shares of well-established companies with credible track records of financial performance that includes among other criteria - a steady payout of dividends and profitability over the years.

Mega cap is a designation for the largest companies in the investment universe as measured by market capitalization. While the exact thresholds change with market conditions, mega cap generally refers to companies with a market capitalization above $200 billion.

The moderately conservative allocation is 25% large-cap stocks, 5% small-cap stocks, 10% international stocks, 50% bonds and 10% cash investments. The moderate allocation is 35% large-cap stocks, 10% small-cap stocks, 15% international stocks, 35% bonds and 5% cash investments.

A small-cap stock is generally that of a company with a market capitalization of between $250 million and $2 billion.