Invest in Top Large Mutual Funds In 2022: High Return Mutual Funds In India
Historically, equities have given inflation-beating high returns. So, to create wealth in the long run, an investor needs to allocate some part of their portfolio to equity. However, some investors are risk-averse. Equities, by nature, are risky. However, large-cap mutual funds are a relatively low-risk option in equity investing as compared to mid-cap, small-cap, and other equity funds. So, investors can consider investing in large-cap mutual funds. In this article, we will discuss how to invest in top large mutual funds in 2022.
Introduction to large cap funds
Before discussing a large-cap fund, let us first discuss top large-cap stocks. The first 100 (1st to 100th) companies in terms of market capitalisation are known as large-cap companies. A large-cap fund is an open-ended equity scheme that predominantly invests in large-cap stocks. A large-cap equity fund has to invest a minimum of 80% of its total assets in equity and equity-related instruments of large-cap companies. Large-cap funds are also known as blue-chip mutual funds.
A large-cap fund has a large-cap index like the Nifty 100 Index as the benchmark. A bluechip fund manager aims to outperform the benchmark index.
Returns given by the best large cap mutual funds
Let us look at the returns given by some of the top large-cap mutual funds.
(Direct Plan-Growth options)
|AUM (Rs. crores)||1-year|
|3-years (CAGR)||5-years (CAGR)|
|Axis Bluechip Fund||34,181||9.83%||18.88%||18.52%|
|Canara Robeco Bluechip Equity Fund||6,020||12.31%||21.99%||17.64%|
|Mirae Asset Large Cap Fund||31,296||13.35%||18.33%||15.92%|
|Edelweiss Large Cap Fund||315||11.98%||18.15%||15.61%|
|BNP Paribas Large Cap Fund||1,254||11.45%||19.70%||15.60%|
The above table shows the best blue-chip fund has given returns of 18.52% CAGR in the last five years.
Who should invest in large-cap mutual funds?
All equity funds, by nature, are risky, as equity markets are volatile. However, large-cap funds are relatively less risky among all equity mutual funds. Hence, investors who have a low-risk appetite and wish to invest in equities can invest in large-cap funds.
Large-cap funds invest in companies that are either leaders or among the top companies in their industry. These companies have proved themselves over the years by their superior financial performance track record. Hence, investors can invest in large-cap funds with the expectation that they will create wealth for them.
Taxation of large-cap mutual funds
For taxation purposes, large-cap mutual fund schemes are treated as equity schemes and taxed accordingly.
Short-term capital gains (STCG) tax
- If you sell your large-cap mutual fund scheme units within twelve months of purchase, the capital gain will be classified as short-term capital gain (STCG). The short-term capital gain (STCG) tax will be levied at 15%.
Long-term capital gains (LTCG) tax
- If you sell your large-cap mutual fund scheme units after twelve months of purchase, the capital gain will be classified as long-term capital gain (LTCG). Every financial year, the first Rs. 1 lakh long-term capital gain will be exempt from taxation. The incremental long-term capital gain above Rs. 1 lakh will be taxed at 10%.
Risks involved in large-cap mutual funds
Like all other equity mutual fund schemes, large-cap funds are also subject to volatility. Large-cap funds can experience big falls during uncertain economic events like all other equity mutual fund schemes. However, the fall in large-cap funds is usually lower than, say, mid-cap and small-cap funds. Similarly, when there is an economic recovery, large-cap funds are the first to recoup their losses and earn handsome returns for their investors.
Return potential of large-cap mutual funds
Historically, equity mutual funds have outperformed other asset classes such as debt, gold, real estate, etc., and have given inflation-beating high returns. Large-cap funds also have the potential to create wealth for their investors. While large-cap funds have the potential to outperform other asset classes over long periods of investments, their returns may be lower than mid-cap and small-cap mutual funds.
Mutual fund compounding effect with respect to time
Large-cap mutual funds are one of the best asset classes to benefit from the magic of compounding and creating wealth for investors in the long run. The longer the investment time horizon, the better the benefit of compounding. With compounding, large-cap mutual funds can help an individual fulfil financial goals.
Advantages of large-cap mutual funds
The biggest advantage of investing in large-cap mutual funds is creating wealth in the long run that helps in fulfilling financial goals. When the sentiment is bad during an overall equity market fall, large-cap mutual funds fall lower than mid and small-cap mutual funds. When the sentiment turns positive and overall equity markets recover, large-cap funds are the first to recover their losses and create wealth for their investors
Reasons to invest in large-cap mutual funds
People who want to take exposure to equity mutual funds should invest in large-cap funds first and then proceed to invest in other equity funds such as mid-cap funds, small-cap funds, sectoral funds, multi-cap funds, etc. For most people, the biggest reason for investing large-cap funds is that they invest their money in blue-chip companies that are leaders in their industry.
These companies have
- A proven track record of profit growth
- Superior margins,
- Consistent dividend payments
- Long-term share price appreciation.
With all these attributes, large-cap funds are the go-to funds for all investors, whether first-time investors or seasoned investors.
Start your investment journey with large-cap mutual funds
Are you a first-time investor looking to invest in mutual funds? If yes, you should look no further and start your investment journey with large-cap mutual funds. They invest your hard-earned money with the best blue chip companies that can compound your wealth in the long run.