Have you heard of the term Large Cap Equity Mutual Funds? What does the term signify? Why should we be investing in it? Which is the best large cap mutual funds to invest in 2019?
It’s raining returns in mutual funds!!! Are you still investing in other investment avenues like fixed deposits (FD), recurring deposits (RD), and traditional insurance products? If so, then why not invest in mutual funds?
If you want to create wealth in the long term, the best way is to invest in equity mutual funds. There are various types of equity mutual funds like Large Cap, Multi Cap, Mid Cap, Small Cap and tax saving mutual funds etc. Additionally, there are multiple ways of investing money in mutual funds which includes onetime lump sum investment or investments at regular intervals which includes your Systematic Investment Plans (SIPs) and Systematic Transfer Plans (STPs). For a first time investor, the best way is to invest through SIPs.
Definition of Large Cap Equity Mutual Funds – Meaning
Large cap funds have their name taken from the two words large and capital, which basically means Mutual funds which invest a larger proportion of their money in companies with huge market capitalization, or let us say large blue chip companies, are called large cap funds. It is a viable alternative to investing directly in companies.
What is market capitalization?
Market Capitalization = Number of Outstanding Shares*Current Price per Share
Also Read : Best Multi Cap Funds to invest in 2019
Why should someone invest in Equity Mutual Funds?
Equity mutual funds provide benefits such as diversification, expert management, liquidity, lower costs, etc.
The two reasons which you cannot ignore include –
- Beating Inflation
- Better Returns
When inflation year on year is 6%-7%, how can your FDs, RDs, and PPF investments beat that inflation? And who says inflation is only 6%-7%? Take example of the Healthcare sector where inflation figures are much higher than this?
So, until you earn a return which is better than your inflation figures, how can you be wealthy?
Good equity mutual funds are giving returns of 12%-15% for last few years.
Before checking the best large cap mutual funds to invest in 2019,
let us see the difference between
- Growth and dividend option in Mutual Funds
- Direct and Regular Plan in Mutual Funds
Large cap growth vs Large Cap dividend Funds
Before we do that, let us first understand the difference between a growth fund and a dividend fund. While a growth fund would primarily reinvest any gains in securities into its own fund, a dividend fund would distribute dividends at regular intervals. Dividend distribution is generally expensive as there is an inherent cost of dividend distributon tax that is borne by the investor. An investor who needs a regular income would still choose to invest in a dividend fund, while those with longer investment horizons could choose growth funds.
Large Cap Direct Plans vs Regular Plans
While direct plans are cheaper and help the investor save costs of paying commissions to the distributor. Would you believe that a SIP of 10000 per month can help you to gain 15-20 Lakhs in a span of 20 years, if you invest in direct plans of mutual funds.
But it sometimes helps to go through a regular plan as distributors will be able to narrow down and advise on funds that a normal investor might not know about in most times. Also, if you are not comfortable with the technology to invest in direct plans of mutual funds, you can go for regular plans.
But My advice would be to go only with direct plans of mutual funds.
Pros and Cons of investing in a Large Cap Fund
As discussed earlier, the major pro about a large cap fund is the ability to invest in very safe largely capitalized companies at the same time through a single fund. This saves a lot of time, and reduces the risk of the investor.
The major con would be the unusual risk this brings to the investor. While an investor in a large cap fund would only have exposure to large cap stocks, thus reducing his market exposure significantly, it is not true that all large cap funds are safe in nature. There has been a record of large cap funds going bust during sideways markets. This could adversely affect the portfolio of the investor in a volatile market.
Best Large Cap Equity Mutual Funds for 2019 – Top 10
Here is a list of best large cap mutual funds to invest in 2019. I tried selecting top 10 funds but was able to zero down on 6 Funds
- Axis Blue Chip Fund
- Reliance Large Cap Fund
- ICICI Prudential Bluechip Fund
- SBI Bluechip Fund
- HDFC Top 100 Fund
- Aditya Birla Sun Life Frontline Equity Fund
All the above Schemes are growth and direct plans only.
Also Read : Best ELSS Funds to invest in 2019
The ICICI Prudential Bluechip direct scheme was launched in 2013 and has average annual returns varying between -2% and 15% depending on the year and the market . It majorly owns stocks in the financial and technology space with maximum ownership in SBI and Infosys.
Axis Bluechip direct scheme that was discussed above was launched in 2013 and has average annual returns varying between 12% and 17% depending on the year and the market . The reason for good performance is % investments in Giant companies.
To conclude, the type of investment depends entirely on the goals, salary and the expected returns of an investor.
Large cap equity mutual funds may give you fewer returns than small cap and mid cap but they are less volatile than small cap and mid cap mutual funds.
It is not certain that these funds will perform the same way in the future. So, it is necessary to review your best large cap mutual funds once in a year.