Most investors fret about the fact that they might lose out on their investments and might have to opt for loans like a personal loan or a home loan to finance their financial requirements since investing in Mutual Funds is quite a risky proposition. Then finally end up being risk averse investors and opt for secured funds. But the underlying rule is that if you wish to earn higher returns you need to expand your exposure to risk. Investing in large cap funds can be one such avenue. But from quite some time now, large cap funds have not been fairing well. If you look at the performance of different categories of funds online, you will observe a trend that demonstrates that large-cap funds have performed miserably in the markets this year, while mid-cap funds have managed to fare in a comparatively better manner. Small-cap funds managed to give an exceptional performance this year, forcing investors to believe that making investments in them was the smartest choice. However, investors have forgotten the main reason for the inception of large-cap funds in the world of money markets. Large-cap funds are quite stable investment options as business as well as stocks. In the form of business, they provide momentum as a result of which these funds would take a long time for fortune reversal to take place. In addition to this, large-cap companies possess a large floating stock, with lots of investors. They thus, hold the record of being highly-tracked and analyzed organizations, making it almost impossible for the company to hide any relevant information from its stakeholders or investors. Investing in large-cap funds involve other benefits too. If you try to sell your funds in bad times, when the funds aren’t making profits, you will be able to get rid of them easily as they possess lower-impact stocks as compared to the stocks held by smaller organizations.
It is thus mandatory or advisable for an investor to include large-cap funds in your portfolio as they not only bring an element of diversity to your fund, but also add stability to it. Analysts advise investors to have more than 50% of their equity fund holdings in large-cap funds as in case the markets crash, the value of these funds will fall less as compared to other funds in the market. While all these benefits of large-cap funds are being highlighted, one may wonder on the reasons behind the massive fall of large-cap funds in the market. The answer is quite simple and accusatory in nature – The main hand behind the decline of large-cap funds in the country are the FIIs or Foreign Institutional Investors. FIIs almost always make investments only in the funds of large-cap companies, and most importantly with hard lower limits. This means that larger the size of an organization, greater will be the shareholding of FII, and thus, it will possess greater control. Although this may not seem like much of a problem, a lot of issues may arrive when time comes for the general FII sell-offs. With a sale in FIIs, large-cap funds have suffered in a disproportionate manner. Although this may add negative remarks to the attributes of large-cap funds, let’s not forget that these limitations are only applicable in the short-run. Just because panic has been created in the market, it does not necessarily mean that investors must lose faith in the reliability of large-cap funds as they are safer investment options, widely-used, predictable and profitable options as compared to other funds in the market. Make sure you exhaust them to the maximum limit and enlarge the size of your returns.