Is large cap growth a good investment?
They're typically companies that have been around the block for a while, and they're usually pretty stable. These are the blue-chip stocks you often hear about. If you're looking for steady, reliable growth and don't want to lose sleep over your investments, large caps can be a good bet, especially in uncertain times.
As an asset class, large-cap growth stocks offer relative stability, great capital appreciation potential and, in many cases, a good dividend income – all very attractive qualities to have in a long-term investment.
Large Cap should be a choice for those individuals who need to make good use of equity investments but don't need their returns to keep on fluctuating with time. Since large-cap funds are known to be financially stable, they are capable of withstanding bear markets.
We've identified three large-cap value mutual funds that have demonstrated impressive annualized returns over 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000 and have a low expense ratio.
Many financial planners recommend parking the bulk of your investments in a diversified, large-company U.S. stock mutual fund or exchange-traded fund. But if you're hoping to participate in decades worth of stock-market gains, it may be worth investing in funds that own small- and mid-cap stocks, too.
Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap. Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high price ratios and low dividend yields).
Large Cap Funds are hence known to generate regular dividends and steady compounding of wealth. Also, these schemes carry a lower risk as compared to the small-cap or mid-cap schemes and are known to generate steadier returns.
Investing in large-caps as a group can balance out the risks of any individual stock while positioning you to benefit from the overall gains in the market with less risk and volatility.
Most are considered high risk and are generally best suited for individuals with a long-term investment horizon and a healthy risk tolerance.
Large-cap funds are less risky than small and mid-cap funds. Small and mid-cap funds have higher growth potential than large-cap funds. Large-cap funds are good for conservative investors. Mid and small-cap funds are suitable for medium-risk takers to aggressive investors.
Should I invest in growth or value stocks?
For example, value stocks tend to outperform during bear markets and economic recessions, while growth stocks tend to excel during bull markets or periods of economic expansion. This factor should, therefore, be taken into account by shorter-term investors or those seeking to time the markets.
Growth investing is likely to shine this year. Investors seeking to benefit from the trend should invest in growth ETFs like Vanguard Growth ETF VUG, iShares Russell 1000 Growth ETF IWF, iShares S&P 500 Growth ETF IVW, Schwab U.S. Large-Cap Growth ETF SCHG and Vanguard Mega Cap Growth ETF MGK.
Small-cap stocks and large-cap stocks both come with their own pros and cons. While small-cap stocks can generate higher returns, they also have a higher risk profile. Conversely, large-cap stocks witness smaller growth but are more stable. Investors should consider investing in both for a balanced portfolio.
While large cap funds, on an average, delivered an annual return of 16.15 percent. Mid cap funds delivered a return of 30.77 percent, and small caps gave the maximum average return of 34.29 per cent.
Large-cap companies are far more likely to pay out dividends to their investors than small-cap companies are. Larger, more stable companies operate in mature, slower-growing industries and are often cash cows that can dole out profits to their shareholders.
To find an appropriate investment mix for your time horizon, find your age and the corresponding portfolio allocation. A typical mixture could include 60% large-cap (established companies), 20% mid-cap/small-cap (small to medium-sized compa- nies), and 20% international (companies outside the U.S.) stocks.
| S.No. | Name | CMP Rs. |
|---|---|---|
| 1. | Abbott India | 25895.00 |
| 2. | Adani Total Gas | 919.15 |
| 3. | Alkem Lab | 4910.40 |
| 4. | APL Apollo Tubes | 1554.45 |
Stable and impactful: Large-cap stocks are typically blue-chip companies at peak business cycle phases, generating established and stable revenue and earnings. They tend to move with the market economy because of their size. They are also market leaders.
Aggressiveness vs.
If you're looking to invest more aggressively within stocks, it may make sense to increase your allocation to small-cap funds. If you're looking to be more conservative, then a higher allocation to large caps is better.
Unless you are very well versed with the markets and have expert knowledge about mutual funds, a good rule of thumb would be to own: Large Cap Mutual Funds: Up to 2. Maybe 3 at best. Beyond that, it doesn't make sense as there will be a great overlap in the shares owned by your mutual funds.
What are the best growth funds?
| Fund | Expense ratio |
|---|---|
| SPDR Portfolio S&P 500 Growth ETF (SPYG) | 0.04% |
| iShares Russell 1000 Growth ETF (IWF) | 0.19% |
| Schwab U.S. Large-Cap Growth ETF (SCHG) | 0.04% |
| Invesco S&P 500 GARP ETF (SPGP) | 0.34% |
The Vanguard Value Index Fund (VVIAX), for example, returned 9.2 percent last year, whereas the Vanguard Growth Index Fund (VIGAX) generated a hefty 46.8 percent. Moreover, that outperformance has continued into 2024, with the same growth index gaining 1.3 percent more than the value index as of February 20.
- DaVita Inc. ( ticker: DVA)
- DraftKings Inc. ( DKNG)
- Extra Space Storage Inc. ( EXR)
- First Solar Inc. ( FSLR)
- Gen Digital Inc. ( GEN)
- Microsoft Corp. ( MSFT)
- Nvidia Corp. ( NVDA)
- SoFi Technologies Inc. ( SOFI)
While the timing of interest rate cuts is uncertain, the Fed had penciled in three rate cuts for 2024 in its last meeting. More appropriately priced cost of capital has far-reaching implications and is particularly beneficial for value stocks.
- High-yield savings accounts.
- Money market funds.
- Short-term certificates of deposit.
- Series I savings bonds.
- Treasury bills, notes, bonds and TIPS.
- Corporate bonds.
- Dividend-paying stocks.
- Preferred stocks.
