Mutual fund advisors say many investors have negative perceptions about large cap mutual funds. They also believe that many investors are reaching wrong conclusions from the underperformance of active large caps vis-a-vis passive schemes. They argue that large cap schemes continue to be an ideal choice for equity investors with conservative risk profiles. In other words, if you want to create wealth over a long period of time without taking so much risk and volatility, large cap schemes are your best bet.
That is why ETMutualFunds looked at SIP returns offered by large cap schemes over 10 years. The toppers in the category offered over 13% in 10 years. Sure, you would argue that we are ignoring the short term performance of these schemes. But you are ignoring the conditions in the market in the last few years. For example, the market was driven by a few stocks for more than a year, before the rest of the market joined the party. The covid years were also marked by peculiar conditions. Several large schemes managed to offer over 12% SIP returns in the three-year period.
That brings us to the question of whether you should invest in an actively-managed large cap mutual fund or passive or index-based large cap mutual fund. First, do you subscribe to passive investment philosophy? Do you believe that active schemes will struggle to beat their benchmarks over a period of time? Do you think investing in an index scheme would help you to save money? If the answers are a big yes, you may consider investing in an index-based scheme.
If you believe in actively-managed schemes, here are our recommendations: Best large cap schemes
