Equity funds invest in the shares of companies. The profit or loss accrued on the investment is transferred to the investor. Based on the size of the company in which the fund invests, they are classified into various categories. One such category is called the large cap fund.
Large cap funds are mutual funds that invest a large portion of their corpus in companies with high market capitalization. Capitalization is an indication of a company’s market value. It is calculated by multiplying the stock price with the number of outstanding subscribers. Market capitalization of large cap companies are higher than Rs 20,000 Crores. These are companies with a good reputation and sound track record. Investors often go to large cap companies for steady and stable returns.
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See Also: Large-Cap Fund vs Mid-Cap Fund: Which One is Good?
Large cap funds have the following advantages:
See Also: Things You Must Know About Equity Investing
There are two sources of revenue from a large cap fund: Capital gains and dividends. Capital gains are taxed in the hands of the investor, whereas, tax on dividends are paid out by the fund house before transferring them to the investor.
Capital Gains: Capital gains are profits from funds. This profit is taxed based on the tenure of the fund. If the fund tenure is less than a year, then capital gains are taxed at 15%. If they have tenure of more than one year, then gains are taxed at 10% on gains which exceed Rs 1 Lakh.
Dividend distribution tax (DDT): DDT is paid by the Companies before paying dividends to shareholders. Now, DDT has been abolished. Dividend is taxable in investor’s hands where Dividends above Rs 10 Lakhs are taxed at 10%.
Low Returns: Though large cap mutual funds are a stable source of investment, they generate low returns.
Lack of Opportunity: These funds cannot take advantage of market changes to a large extent.
See Also: Different Types of Mutual Funds
Less Ownership: Shareholders enjoy ownership in the company. However, when it comes to large cap funds, your investment will be only a small portion, and hence less ownership and power.
Fund Name |
1 Year Return (%) |
3 Year Returns (%) |
5 year Returns (%) |
MIRAE asset large cap fund |
15.98 |
16.09 |
12.50 |
Axis Bluechip fund |
23.34 |
21.50 |
11.93 |
ICICI prudential Bluechip fund |
12.02 |
13.39 |
9.42 |
SBI Bluechip fund |
14.55 |
12.21 |
10.48 |
Nippon India large cap fund |
9.55 |
14.39 |
9.17 |
Large cap mutual funds are a safe and stable investment which can be selected by investors with long term financial goals. Ensure the fund house and fund manager are strong with a good track record. Selection of stocks depends on these factors, and it largely influences the fund’s overall performance.
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