Learn about large-cap growth from companies offering mutual funds.
What is a large-cap growth fund?
- Large-cap growth funds invest in the stocks of larger companies. Large-cap stocks are in the top 70% of capitalization of the equity market, the biggest in terms of market share. A growth fund is a mutual fund that includes companies primed for revenue or earnings growth faster than that of their industry peers or the overall market.
- Growth funds are divided into small-, mid-, and large-cap markets.
- Most are considered high risk and are generally best suited for individuals with a long-term investment horizon and a healthy risk tolerance. However, remember that all investments involve risk including a loss of principal.
Advantages of a large-cap growth portfolio
Large cap companies are usually found in the market’s leading benchmark indexes, which include the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite.
- The S&P 500 Index is the benchmark even though it only focuses mainly on the large-cap market. It tracks the performance of the 500 largest publicly traded companies in the U.S. across several different sectors.
- The Dow Jones Industrial Average tracks the performance of “blue chip” companies, these companies are considered the dominate leaders in their perspective industries.
- The Nasdaq Composite is a stock market index that includes over 3,000 stocks listed on the Nasdaq stock exchange, including the S&P 500 and the Dow Jones Industrial Average. Most of the companies listed in the NASDAQ Composite are in the informational tech sector.
An individual investor cannot invest directly into an index, but you can invest in a fund through either a mutual fund or ETF (Exchange Traded Fund).
Some of the benefits of investing in large-cap funds are:
- The underlying large-cap companies are typically household names, with a solid reputation for producing quality goods and services.1
- 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.1
- Large-cap stocks have potential to recover sooner from any broad market declines because these companies are better suited to weather economic downturns.1
- It’s easier for investors to find and analyze public information about the fund or the underlying invested companies.
- For many, the large cap companies’ mature market establishment has allowed them to institute and commit to high dividend payout ratios.
- Large-cap stocks are generally less risky and considered to be a more conservative investment choice when compared to small or mid-cap stocks.
Investingin mutual funds that invest in large cap companies
Large-cap stocks have a unique advantage for investors, including stability in size and tenure, steady dividend payouts to shareholders, and clarity in valuations. Mutual funds are an easy way to tap into expert professional management so you can reach your long-term financial goals. Here are some things to consider when investing:
Longevity
With individuals living longer and fuller lives, investors may want to consider a diversified mix of long-term growth solutions across market capitalizations and regions. Diversification does not assure a profit or protect against market loss, but it can help mitigate it.
Volatility Management
Volatility comes in all shapes in sizes, and investors may want to consider solutions offered through our NYLIFE Securities LLC Registered Representatives to help manage volatility and build resilient portfolios.
Tax-Conscious
For those who seek tax-favored investing, municipal bond funds2have historically had a low correlation to other fixed-income sectors, which can help investors add another layer of diversification to their portfolios.
Investments are offered through NYLIFE Securities (memberFINRA/SIPC), a Licensed Insurance Agency and a New York Life company.
1Anna-Louise Jackson, John Schmidt, “Investing Basics: Large-Cap Stocks,” Forbes, Oct 27, 2021. Forbes.com
2May be subject to Alternative Minimum Tax (AMT).
FAQs
Large-cap growth funds are generally considered to be safer than other stock funds because they invest in large, well-established companies. In investing, however, “safe” doesn't mean risk free. You can still lose money if the market takes a downturn or if the companies don't grow as expected.
What are large-cap growth funds? ›
Large-growth funds invest in stocks of big U.S. companies that are projected to grow faster than other large-cap stocks. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large-cap.
What are the large-cap funds? ›
Large Cap funds are a kind of equity funds that invest a major proportion of their assets under management (AUM) in equity shares of companies with a large market capitalization, such as Reliance, HUL, TCS, and more. These companies that fall under this bracket are known to have a high reputation in the market.
What is the difference between large-cap growth and small-cap growth? ›
Large-caps: Stable returns with less room to grow. Possible dividend payouts. Small-caps: More volatile, but with the potential for growth and higher returns. Blended approach: Diversification in small-cap volatility hedged by possible dividend payouts and/or small, steady returns by large-caps.
What does large-cap investment mean? ›
What is. LARGE. Large cap refers to a company with a market capitalization value of more than $10 billion. Also referred to as “big cap,” large cap describes a class of popular stocks preferred by investors for their stability.
How risky are large-cap growth funds? ›
Are large-cap growth funds risky? Large-cap growth stocks can be risky. High expectations for future growth may already be built into their stock prices, which means they can fall sharply if they don't meet those expectations.
What is the best large growth fund? ›
Here are the best Large Growth funds
- iShares® ESG Advanced MSCI USA ETF.
- Vanguard Growth ETF.
- Direxion NASDAQ-100® Equal Wtd ETF.
- JPMorgan US Momentum Factor ETF.
- Vanguard Mega Cap Growth ETF.
- iShares Morningstar Growth ETF.
- iShares Core S&P US Growth ETF.
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.
Is the S&P 500 a large-cap fund? ›
Large-cap stocks are represented by the S&P 500; mid-cap stocks by the S&P MidCap 400 Index; and small-cap stocks by the S&P SmallCap 600 Index. These indexes are unmanaged and do not take into account the fees, expenses, and taxes associated with investing.
Is it better to have a large-cap or small-cap during a recession? ›
Investing in small caps during recessions has generated superior investment returns, according to our back-testing of the data to the late 1980s (see Table 1, below).
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.
Which fund is better small-cap or large-cap? ›
Large-cap funds prioritise stability with lower risk, ideal for conservative investors. Mid-cap funds offer a balance, providing growth potential with moderate risk. Small-cap funds hold the allure of potentially high returns, but come with the most significant risk.
What is large-cap fund in simple words? ›
Large Cap Mutual Funds are equity funds that invest a bigger proportion of their total assets in companies with a large market capitalisation. These companies are highly reputed and have an excellent track record of generating wealth for their investors over a long period.
Should I invest in large-cap growth? ›
Large-cap stocks include many of the best-known companies in the world, and although they might not be as exciting as smaller companies with high growth potential, they are typically a safer investment. Explore the world of large-cap stocks and learn how these can shape your portfolio.
Is it good to invest in large-cap? ›
Lower risk: Compared to mid-cap and small-cap funds, large-cap funds invest in well-established companies with larger market capitalizations. These companies tend to be more financially stable and resilient to market fluctuations, offering a lower overall risk profile.
What is an example of a growth fund? ›
For example, if the average tech stock is currently growing at an expected earnings per share of 4% over the next five years, a tech company expected to grow at an 8% rate over the same period would be considered for inclusion in a growth fund.
What is large-cap growth vs mid-cap? ›
Mid-cap funds have moderate volatility and moderate liquidity. Small-caps stocks are more volatile and have less liquidity. Large-cap offers a steady and consistent return, and they have less volatility. They have provided an average return of 7% in the past 5 years.
What is the difference between a large value fund and a large growth fund? ›
Growth and value are two fundamental approaches, or styles, in stock and stock mutual fund investing. Growth investors seek companies that offer strong earnings growth while value investors seek stocks that appear to be undervalued in the marketplace.
