Large Cap Stocks

What Is Market capitalisation?

Market capitalisation, or market cap, is the current market value of the outstanding shares of a corporation. Market capitalisation equals the current share price multiplied by the number of outstanding shares.

The investing community frequently used market capitalisation value to rank and evaluate the relative sizes of firms within a certain industry or sector. To calculate the market capitalisation of a firm, multiply its current share price by the total number of outstanding shares.

Large-cap vs mid-cap stocks vs small cap stocks

Company type and stature: Large-cap corporations are those with a large market capitalisation and a long history in the equity market. These organizations have trustworthy management and are ranked among the top 100 in the nation. Mid-cap enterprises fall between large-cap and small-cap corporations. These firms are small and ranked within the top 100–250 in the nation. Lastly, small-cap enterprises are considerably smaller in size and have the possibility for quick expansion.

Volatility: Volatility is intimately tied to your investing risk on the stock market. If a stock’s price remains relatively consistent under chaotic market conditions, it has low volatility. In contrast, equities that see considerable price movements over such periods are referred to as extremely volatile. Large-cap stocks tend to be less volatile, meaning their values remain generally constant despite market turmoil. Thus, they are generally low-risk investment alternatives. Mid-cap stocks are somewhat riskier and more volatile than large-cap equities. Small-cap stocks are extremely volatile, and their values can fluctuate substantially, hence increasing the risk for investors.

Growth potential: Large-cap stocks have a lesser growth potential than mid- and small-cap equities. Large-cap stocks are a reliable investing option, particularly for those with a longer investment horizon. This makes large-cap stocks appropriate for investors with low risk tolerances. If your risk tolerance is modest, you may like to consider mid-cap stocks, which offer a somewhat better growth potential. Small-cap companies offer the greatest growth potential, but you should invest in them only if you have a high risk tolerance.

Liquidity: The word liquidity refers to the ease with which investors may purchase or sell large-cap shares without impacting the share price. Due to the increased demand for large-cap shares on the stock market, large-cap equities tend to have greater liquidity today. Therefore, it is easy to square off holdings when purchasing such shares. Comparatively, mid-cap firms have lesser liquidity due to a slightly lower demand for their equities. Small-cap firms have the least liquidity, making it more difficult to square off bets.

Asset Allocation

Asset allocation is an investing strategy that seeks to achieve a balance between risk and return by dividing a portfolio across several asset classes, such as equities, fixed income, cash equivalents, real estate, etc. As each asset class has a distinct correlation with one another, the theory states that asset allocation helps investors reduce the impact of risk on their portfolios.

Features of Large-Cap Stocks

  • Large cap stocks are the equities of the country’s 100 largest, most established, and most mature enterprises, constituting the majority of the equity market.
  • These equities are less hazardous since their prices remain constant despite economic volatility.
  • For investors with a longer investment horizon, these stocks represent a reliable investment opportunity.
  • These are pricey stocks, thus large cash is required.
  • These stocks have a high level of liquidity because they may be purchased or traded rapidly without a significant price impact.

Benefits of Investing in large-cap stocks?

  • Stability

Within the equities asset class, large-cap stocks are reasonably stable investing possibilities. Therefore, they provide steadiness to your portfolio. In general, market upheaval or a negative trend has less of an effect on the values of these equities. The likelihood of a large-cap firm being insolvent or bankrupt is relatively remote. As a consequence, these equities somewhat offset any market-related losses you may incur from other holdings in your portfolio.

  • Income

Large-cap firms pay dividends to their shareholders. Therefore, dividends are a regular source of income for equity holders. Therefore, even if the capital gains upon sale are not substantial, you can still enjoy the dividends. If there is lack of steady returns from other forms of investments, dividends can compensate.

  • Information

Large-cap information is readily available to the public. All large-cap corporations must disclose/publish their financial accounts and other information. Therefore, investors can quickly evaluate the company’s operations, trends, and future possibilities. The accessibility and availability of such information will aid you in making prudent financial selections. In addition, you may utilise financial data to compare firms and select the optimal stock for your investment portfolio.

Drawbacks

  • Expensive

In India, large-cap stocks are in great demand. This is because many businesses have been in operation for decades, their track record and performance inspire investor trust. Therefore, they are a recommended investment option. Consequently, stock prices are frequently out of reach for investors with few liquid assets.

  • Capital appreciation

Large-cap stocks are dependable investments. Their response to an advance or a decline in the market will not be extremely drastic. Thus, capital appreciation may not be as high as it is with mid-cap or small-cap stocks. But large-cap stocks provide investors with modest returns and recurring dividends.

Frequently Asked Questions

Large cap refers to a firm with a market capitalisation of $10 billion or more. Large caps, sometimes known as “big caps,” refers to a category of prominent stocks that investors choose for their stability.

In difficult market conditions, large-cap stocks tend to be less volatile as investors seek quality and stability and become risk-averse.

Large-capitalisation funds are often known as blue chip funds. Blue chip mutual funds are a form of equity funds that invest primarily in equities and equity-related securities of big cap corporations defined by characteristics such as large and well-established, known and respected.

    Read the Latest Market Journal

    Predicting Trend Reversals with Candlestick Patterns for Beginners

    Published on Apr 24, 2024 44 

    Candlestick patterns are used to predict the future direction of price movements as they contain...

    Introduction to unit trust

    Published on Apr 23, 2024 35 

    In the diverse and complex world of investing, unit trusts stand out as a popular...

    Back in Business: The Return of IPOs & Top Traded Counters in March 2024

    Published on Apr 17, 2024 546 

    Start trading on POEMS! Open a free account here! At a glance: Major indices continue...

    Weekly Updates 15/4/24 – 19/4/24

    Published on Apr 15, 2024 72 

    This weekly update is designed to help you stay informed and relate economic and company...

    From $50 to $100: Unveiling the Impact of Inflation

    Published on Apr 12, 2024 160 

    In recent years, inflation has become a hot topic, evoking strong emotions as the cost...

    Japan’s Economic Resurgence: Unveiling the Tailwinds Behind Nikkei 225’s Record Leap

    Published on Apr 11, 2024 90 

    Source: eSignal, Intercontinental Exchange, Inc. In the heart of Japan’s economic landscape, the Nikkei 225...

    Weekly Updates 8/4/24 – 12/4/24

    Published on Apr 8, 2024 109 

      This weekly update is designed to help you stay informed and relate economic and...

    What Makes Forex Trading Attractive?

    Published on Apr 2, 2024 192 

    In a world where the click of a button can send goods across oceans and...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you

    IMPORTANT INFORMATION

    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  

     

    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com