Large cap funds are a type of mutual fund that invests in large-cap companies with a market capitalization of more than $10 billion. Market capitalization refers to the total value of a company’s outstanding shares. Large cap funds aim to provide long-term capital growth by investing in established, financially stable companies that have a track record of stable earnings and dividends.
Large cap funds are considered less risky than other types of funds as they invest in established companies that have a proven track record of success. These companies are typically well-known brands with a strong market presence, making them less susceptible to market volatility and economic downturns.
Investing in large cap funds provides investors with the opportunity to gain exposure to a diversified portfolio of established companies. These companies are generally leaders in their respective industries and have a proven track record of financial stability. Investing in a large cap fund can provide investors with the potential for long-term capital growth, as these companies have a history of generating strong earnings and dividends.
One of the main advantages of investing in large cap funds is that they provide stability to an investor’s portfolio. Large cap companies are often considered blue-chip stocks, and their stable earnings and dividends provide investors with a consistent stream of income. These companies are also less susceptible to market volatility and economic downturns, making them a less risky investment option.
Another advantage of large cap funds is that they offer liquidity. Investors can buy and sell units of large cap funds on any business day, which makes it easy to enter or exit the fund as per their requirements.
In terms of taxation, large cap funds are taxed differently based on the holding period. If the units are held for less than one year, the gains are taxed at the investor’s slab rate. If the units are held for more than one year, the gains are taxed at 10% without indexation or 20% with indexation, whichever is lower.
In conclusion, large cap funds are a suitable investment option for investors who want to gain exposure to established, financially stable companies with a proven track record of success. They offer stability, liquidity, and the potential for long-term capital growth. It’s important for investors to understand the risks associated with large cap funds and choose a fund that is suitable for their investment horizon and risk tolerance.