Name of Fund	5 Year Returns (p.a.)	Scheme Category
Axis Bluechip Fund	13.50%	Large Cap
ICICI Prudential Bluechip Fund	12.90%	Large Cap
Mirae Asset Large Cap Fund	13.76%	Large Cap
SBI Bluechip Fund	14.01%	Large Cap
Kotak Bluechip Fund	14.24%	Large Cap

Large-cap funds are those mutual funds that invest in equity shares of companies categorised under large market capitalisation. Large-cap organisations are reputable and trustworthy players with a well-established track record. These companies constitute the top 100 when it comes to market capitalisation, such as Asian Paints, Axis Bank, Dabur India, Infosys, and more.

Large-cap funds are ideal for those who need slow but steady returns over a period of time with relatively lower risk. Besides, these funds depend on your investment horizon and risk/return objectives.

Is it better to invest in large-cap funds than fixed deposit?

Due to demonetization in 2016 and availability of tax-saving mutual funds, the recent years have witnessed an exponential increase in the mutual fund investments. As a result, fixed deposits have become a less popular saving instrument among investors.

Many investors are now opting for large-cap funds due to less risk and stable returns on long-term investments. While the returns on FD is pre-determined by the banks, they remain the same throughout the tenure. Further, FD requires a lump sum amount, whereas large-cap funds do not require a lot of money to start investing. You could start with as low as Rs. 500 per month.

Which is riskier – Large Cap Funds or Mid Cap Funds?

Large-cap companies are relatively less risky than mid-cap ones as they are already well-established and provide stable returns and dividends to its investors. Mid-cap stocks, on the other hand, have more potential to expand than large-cap stocks. However, when such companies hit a rough patch, the stock prices fall, and it may take some time to bounce back.

This is why, mid-cap funds are considered more volatile, and risker than large-cap stocks and only those investors who have a long horizon and ability to cope with high risk should invest in them.

Advantages of large-cap funds

Large-cap funds offer various advantages to its investors.

• Stable returns – Since these funds are invested in large and reputable companies that are less likely to become insolvent, they yield high and stable returns with minimal risk.
• Low risk – As compared to small and mid-cap funds, large-cap funds fall under the low-risk category as the NAV (Net Asset Value) of such funds fluctuates less according to the market conditions. Hence, large-cap funds are ideal for investors with an appetite for low to moderate risk.
• Investment horizon – This fund works best for investors with long-term investment horizons. You need to invest in large-cap funds for at least five to seven years to yield returns in the range of 12% - 15%.

Disadvantages of large-cap funds

If you thought large-cap stocks are free from any shortcomings, think again. Here are some of its disadvantages.

• Lower returns – Though the prices of these funds are stable, they often yield low to average returns than small and mid-cap funds. This is because large companies are already established and have less growth potential. On the contrary, small and mid-sized organisations have high chances to grow.
• Not recommended for risk-takers – If you have a high-risk appetite, then these stocks may not be the best bet for you since they provide regular and sustainable returns at a lower risk.
• Investment horizon – Large-cap funds are not suitable for those investors who want to invest for a short tenure. These funds generate high returns only in the long-term.

Is it advisable to invest in large cap funds to build the retirement corpus of the individual ?

Large-cap funds can prove to be a prudent investment option for individuals to meet their retirement planning goals. Since these funds have a reasonable amount of risk and yield steady returns, many investors turn to these stocks to invest their retirement corpus. These schemes are also suitable for early-age retirement planners as they tend to generate high returns and good capital appreciation, on long-term investments, i.e., at least five to seven years.