Best Large Cap Funds
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Best Large-Cap Mutual Funds 2019 – Top 10 Large-Cap Funds

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Large-cap companies are those having a market capitalisation of Rs 20,000 crore and above.
This article covers the following:

1. What are Best Large-Cap Mutual Funds?

Large-cap mutual funds are those that invest predominantly in companies having a large market capitalisation. These are popular for their consistent returns over some time. The companies of large-cap funds are generally leaders in their field of business and hence, tend to remain more stable than smaller or mid-cap companies at times when markets are volatile. The large-cap companies generally have a good track record in the market backed by healthy corporate governance practices.

2. Who Should Invest in Best Large-Cap Mutual Funds?

Individuals make investments based on their requirements, goals, and risk profile. The large-cap mutual funds are apt for those who want to earn higher returns with little to no risk of market fluctuations. These funds are suitable for those investors who are less aggressive in their investment strategy and don’t wish to invest in risky mid-cap and small-cap mutual funds mutual funds.

Investing in large-cap mutual funds is a good option for the first-time investor. The underlying companies have a history of consistent performance during the highs and lows of the market. Investors must understand that these funds may not pose very high returns even at the hour of favourable market conditions. But keep in mind that the returns from large-cap funds will be less volatile.

For all investment-related queries on large-cap mutual funds, visit ClearTax.

3. Things an Investor Should Consider When Investing in Best Large-Cap Mutual Funds

Large-cap mutual funds are not subject to as much risk as to the small- and mid-cap mutual funds. But as an investor, you must still weigh in those elements that may impact the performance of your funds and its ultimate returns. Your age, level of risk tolerance, financial goals, investment horizon, and so on make distinct factors for consideration.

Enlisted are some of the factors that you must analyse while investing in large-cap mutual funds.

a. Know your investment objective

Depending on your investment profile, check if the objectives of the fund are in line with your goals. Understand the style of fund management to know about the performance of the funds.

b. Past performance of the large-cap fund

With large-cap mutual funds, the past performance is crucial. As an investor, you must consider the performance of the fund in the bullish and as well as the bearish market cycle. Pick funds that have been consistent in their numbers in all market conditions and cycles.

c. Experience of the fund manager

Fund managers, particularly in the case of large-cap mutual funds, play a decisive role in the generation of returns. Fund managers with experience and expertise will be able to move the capital in the right direction when the market looks promising.

d. Expense ratio

Expense ratio will impact you directly and includes costs such as the brokerage fee, the fee charged by the mutual fund house, and so on. Some fund houses may charge a high fee but also offer higher returns. Determine the fee, other charges, NAV, and returns.

e. Know about the exit load

This is a cost that as an investor, you incur directly. Even though the role of exit load comes to the fore only when you decide to sell your units, it is nevertheless worth noting it. Exit load forms a fraction of the NAV that you receive. Hence, the lower exit load translates into higher returns.

4. How to Evaluate your Best Large-Cap Mutual Funds?

As an investor, you must look at certain financial ratios to evaluate your funds. Following are some of the important ratios to be considered:

a. Sharpe ratio

Sharpe ratio measures the risk-adjusted return of a portfolio. If your fund has a higher Sharpe ratio it means that it is seen as a portfolio that is relatively superior compared to its peers.
Sharpe ratio = (Mean portfolio return − Risk-free rate)/Standard deviation of portfolio return

b. Standard deviation

The dispersion of a set of data from its mean or average is measured through Standard deviation. In finance, standard deviation indicates the volatility of an investment from its annual rate of return. A stock that has a higher standard deviation will have a larger price range, which again is indicative of higher volatility in comparison to stocks with a low standard deviation.

c. Beta

Beta highlights a fund’s responsiveness to the correlated movements of a benchmark. If a fund registers a Beta of 1.0, then it simply means that its volatility is exactly equal to the benchmark. If a fund has a Beta of 0.90 or less, then it means that it is 10% less volatile and if the Beta is 1.40, then it means that the fund is 40% more responsive than the benchmark.

d. R-Squared

The percentage of fund returns that fall in line with the benchmark returns is reflected by R-Squared. The value of R-Squared rests between 0 and 1 and is denoted as percentages from 0 to 100%. A fund with an R-Squared of 100% will have its securities’ movements explained by movements in the index. A higher value of R-squared means a more useful beta figure.

e. Alpha

A fund manager’s ability to make profits when the benchmark registers profits is measured by an Alpha. Alpha can be equal to 1.0 or even less or more than 1.0. The higher the Alpha, more is the ability of the manager to reap profits from the benchmark movements.

5. Advantages and Disadvantages of Best Large-Cap Mutual Funds

a. Advantages of best large-cap mutual funds

One of the biggest advantages of adding large-cap funds in the portfolio is the stability they offer. These companies with a solid track record, offer steady payment of dividends as well. This compensates for the fact that large-cap funds do not have the potential for very high returns.
Because of their presence in the market for many years, investors can access their profitability and financial details for a course of time to assess their performance before making any decisions. This financial research data, when viewed alongside the history of the company and its present business activities, can help in the accurate determination of the valuation.

Investing in mutual funds can, however, be risky and it is recommended to consult an expert. You may speak to our investment experts at ClearTax for guidance.

b. Disadvantages of large-cap mutual funds

These funds have been characterised as an ideal investment option for new investors or those that do not wish to take risks. One disadvantage of this fund is that the growth potential of underlying stocks might be limited.
The returns generated also happen to be lower than those that one gets from the small-cap or mid-cap funds. In addition to this, it is the fund manager who takes the decisions pertaining to the stocks in your portfolio, which leaves you with little or no control on the portfolio.

6. Top 10 Best Large-Cap Mutual Funds

Based on large-cap fund performance indicator values, following are the best large-cap mutual funds. The rankings done here are for a consolidated list of large-cap equity funds on a 3-year return basis.

Top large-cap funds

5-year returns

Axis Bluechip Fund – GrowthLarge-Cap Fund

12.31%

Mirae Asset Large Cap Fund – Regular – GrowthLarge-Cap Fund

11.90%

Reliance Large Cap Fund – GrowthLarge-Cap Fund

10.77%

HDFC Top 100 Fund – GrowthLarge-Cap Fund

10.61%

ICICI Prudential Bluechip Fund – Institutional Option I – GrowthLarge-Cap Fund

10.42%

Mutual funds are subject to market risk and require informed decision making. Reach out to our team of financial experts at ClearTax to gain further guidance on investing.