Why do investors prefer large-cap funds? Explained!

Mutual funds provide a vast array of investment options for individuals to choose from. For those looking for growth, equity mutual funds are a great option, while those who are risk-averse can consider debt mutual funds. Within equity funds, there are numerous sub-categories to choose from. One of the most sought-after options is large-cap funds, which invest in well-established companies with a large market capitalisation. These funds offer stability and steady growth, making them a popular choice among investors. Read on to find out more about large-cap funds and see what are the advantages that make them attractive for investors. 

What is market capitalisation?

To understand large-cap funds, you have to understand the concept of market capitalisation first. Market capitalisation is a measure of a company’s market value, or market share, as of a certain time period. It is a calculation of the number of shares that are trading at a certain price.

Large-cap firms have a market capitalisation of Rs 20,000 crore or more. Meanwhile, the market capitalisation of mid-cap enterprises ranges from Rs 5,000 crore to less than Rs 20,000 crore. Small-cap firms have a market capitalisation of less than Rs 5,000 crore.

What are large-cap funds?

Large-cap funds are a popular investment option among investors who are looking for stability and steady growth in their portfolios. These funds primarily invest in stocks of large-cap companies, which are defined as huge corporations that have a stable growth trajectory. 

By investing in a large-cap fund, you are essentially putting your money in a basket of stocks of well-established and financially sound companies. This not only reduces the risk in your portfolio but also provides a reliable source of income in the form of dividends. Investments in large-cap funds are also known to be less volatile compared to other investment options, making them a preferred choice for long-term investment goals.

Why are large-cap funds preferred? 

Below are some reasons why large-cap funds are widely preferred.

  • Large-cap corporations have a strong financial foundation. They have an effective business strategy, a track record of continuous growth, and produce revenue on a constant basis. Large-cap funds’ revenue is stable due to their steadiness. As a result, large-cap companies rarely face insolvency owing to economic conditions. You can use SIP Calculator to check the returns from mutual funds. Market changes have minimal effect on their performance. As a result, they provide steadiness to your portfolio. Furthermore, large corporations pay out a sizable dividend. This contributes to the consistent growth of your portfolio’s worth.
  • The corpus of large-cap mutual funds is primarily invested in blue-chip enterprises. These firms’ exceptional performance and consistent earnings offer attractive results. Large-cap company stock values are relatively stable. As a result, they provide long-term capital appreciation to investors.
  • Large-cap shares have the potential to weather numerous market cycles’ ups and downs. They thrive during a bull market and can also withstand market volatility. It’s a generally safe investment that can withstand an economic slump. It quickly heals without jeopardising commercial opportunities.


The reasons outlined above demonstrate why large-cap funds can be a good investment option for those seeking stability and steady growth in their portfolios. However, it’s important to note that investing in any type of fund, including large-cap funds, comes with a certain level of risk. To ensure the best results, it’s crucial to do thorough research on the fund of your choice and choose one that aligns with your risk appetite and investment goals.