Are you a low-risk investor? Know why experts recommend large cap funds

Safe investment bet: Looking for investment options with a low-risk profile? Large-cap equity funds could be the answer, according to experts, offering a secure investment avenue for those inclined towards consistent returns. These funds predominantly invest in well-established companies with substantial market capitalisation, providing a lower-risk avenue compared to small-cap or mid-cap counterparts.

"Large-cap funds are ideal for investors with a long-term horizon, seeking stability over high-risk, high-reward options. While returns may be moderate compared to smaller companies, the underlying stability and sectoral diversification make large-cap funds an attractive choice," said Aastha Gupta, CEO, Share India FinCap.

Navigating downturns: Large-cap shields?

Large-cap funds emphasise sectoral diversification, spreading investments across various industries to create a diversified portfolio and mitigate sector-specific risks. Another point of interest is the stability large-cap companies bring to these funds during economic downturns, making them a pragmatic choice for those seeking resilience in their investment strategy.

Investing in large-cap mutual funds, while offering a host of advantages, is not without its share of risks. "Firstly, the vulnerability to poor market performance looms as a significant concern, driven by internal and external factors such as geopolitical events and economic influences. These uncertainties can impact the returns of large-cap funds, reminding investors of the unpredictability inherent in the market," Amit Gupta, SAG, Infotech explained.

"Secondly, liquidity risk emerges as another factor to consider. In situations of low liquidity, fund managers may encounter challenges with liquidating assets, potentially impeding the ease of redemption for investors. Lastly, the sensitivity of large-cap funds to interest rates adds another layer of risk. Rising interest rates have the potential to cause a decline in security prices, a phenomenon influenced by the credit availability of issuers and market demand," Gupta added.

Groww's top large cap funds for 2024

Several large-cap mutual funds have caught the attention of investors due to their high returns. Notably, the Nippon India Large Cap Fund, positioned within the equity segment of Nippon India Mutual Funds, has recorded an annualised return of 25.74 per cent over three years and 18.17 per cent over five years, with a minimum investment of Rs 100 for both lump sum and SIP investments.

Likewise, the ICICI Prudential Bluechip Fund, falling under the equity category of ICICI Prudential Mutual Funds, has delivered annualised returns of 21.19 per cent (3 years) and 17.86 per cent (5 years), with a minimum investment of Rs 100 for lump sum and SIP. The Baroda BNP Paribas Large Cap Fund, featuring annualised returns of 17.93 per cent (3 years) and 18.14 per cent (5 years), requires a minimum investment of Rs 5,000 for lump sum and Rs 500 for SIP.

The Canara Robeco Bluechip Equity Fund, IDBI India Top 100 Equity Fund, and HDFC Top 100 Fund have also demonstrated consistent performance over three and five years, each with varying minimum investment amounts for lump sum and SIP investments.