Mutual funds can be a suitable option for investors seeking a balanced approach to growth. Professionally managed, mutual funds make investing accessible even to those who do not have the time or expertise to track the market.
Additionally, the wide range of mutual funds in the market means that there is a scheme to suit every investor.
A new option in this space is the Bajaj Finserv Large Cap Fund. The third equity fund launched by Bajaj Finserv Asset Management Ltd., the Bajaj Finserv Large Cap Fund sets itself apart with its concentrated strategy and a high active share that can potentially offer benchmark-beating returns in the long term. This article tells you more about this scheme and what type of investors it can suit.
Large can funds are equity mutual funds that invest at least 80% of their portfolio in India’s largest companies in terms of market capitalisation. Large cap companies are ranked between 1 and 100 basis the market capitalisation. These are typically market leaders with a track record of relatively stable growth, profitability and healthy balance sheets.
As a result, large cap funds tend to be less volatile than mid- and small-cap funds. While they may not offer the potential for rapid growth that smaller companies do, large cap stocks have historically* offered the potential for consistent growth in the long term with greater resilience to market fluctuations (*past performance may or may not be sustained in the future). This makes them suitable for investors seeking inflation-beating return potential with a relatively low impact of volatility on the invested capital as compared to mid and small cap stocks.
The Bajaj Finserv Large Cap Fund follows a concentrated strategy, investing in 25 to 30* high-conviction stocks. These are stocks of companies that have been leading the charge of India’s rapid economic growth and potential prospects for future growth.
High-conviction stocks those chosen by a fund manager based on strong expectations for future growth. Thorough research and analysis go into this stock selection process, with a view to potentially outperform the broader market in the long term.
The portfolio will also have a high active share – where the weightage of stocks in portfolio composition will differ significantly from the benchmark index. This indicates a high level of active management with the aim of potentially achieving benchmark-beating returns in the long term.
Additionally, Bajaj Finserv Asset Management Ltd will follow its in-house InQuBe investment philosophy, which combines Information edge (seeking superior market-related) information, Quantitative edge (quantitative and analytical models for better processing of data) and Behavioural edge (insights from behavioural finance on psychological forces driving markets and investment decisions).
Large cap funds offer provide several benefits to investors, which include:
Relative stability: Large cap companies are typically well-established, with healthy balance sheets and strong fundamentals. This makes large cap funds typically less volatile than mid-cap or small-cap funds.
Potential for steady returns: Historically, large cap companies have shown relatively stable growth over the long term, with better risk-return balance than mid or small cap stocks.
Liquidity: The large trading volumes of large cap stocks makes them highly liquid. Liquidity indicates the ease and speed with which an asset can be converted to cash without significantly affecting its market price.
Resilience: Large cap companies usually have the resources and market presence to better withstand economic downturns compared to smaller companies. Historical data shows that large cap stocks tend to fall lesser and recover faster than small and mid cap stocks. However, it is essential to note that historical trends do not predict future outcomes and past performance may or may not be sustained in the future.
Investors can choose either lumpsum or Systematic Investment Plans (SIPs) for investing in large cap funds. Each method has its own advantages and is suited to different investment goals and market conditions.
Lumpsum investment: This is a one-time investment, better suited for large sums. This approach can be beneficial when market conditions are favourable or when an investor has a large amount of capital available. A key advantage of lumpsum investing is that if offers higher capital appreciation potential than SIPs during a market upswing. This is because the entire principal is exposed to market growth potential from the outset. Moreover, investors can take advantage of market trends by timing the market.
However, lump sum investing carries higher risk due to market volatility. If the market experiences a downturn shortly after the investment, the entire capital is exposed to potential losses. This approach requires a certain level of market timing.
Systematic Investment Plan (SIP): An SIP allows investors to invest a fixed amount regularly, such as monthly or quarterly. This method is particularly beneficial for those who prefer a disciplined and gradual approach to investing. SIPs mitigate the risk of market volatility by averaging the purchase cost over time. When the market is high, fewer units are purchased, and when the market is low, more units are bought. This strategy, known as rupee cost averaging, reduces the impact of short-term market fluctuations and mitigates risk.
SIPs are also suitable for investors with limited capital, enabling them to start investing with smaller amounts. Additionally, SIPs provide flexibility, allowing investors to adjust their contribution amounts based on their financial situation.
Investors can purchase units at the face value of Rs 10 during the NFO period (June 29 to August 12) and at the Net Asset Value when the fund reopens for subscription within five business days of the allotment date. The minimum investment amount for lumpsum and SIP is Rs 500 respectively. To invest, you can visit Bajaj Finserv AMC's official website and click on the login/register tab on the home page. You can also visit the scheme page for the Bajaj Finserv Large Cap Fund and click on the ‘invest now’ button.
Existing Bajaj Finserv AMC investors can log in with their PAN details, while new investors will need to sign up by providing some basic information such as PAN, identity details and bank account information. Investors can then transact seamlessly and quickly through an end-to-end digital journey.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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