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.
Investing in 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:
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 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.
For those who seek tax-favored investing, municipal bond funds2 have historically had a low correlation to other fixed-income sectors, which can help investors add another layer of diversification to their portfolios.