Investing in large cap stocks can be a great way to get exposure to the stock market and protect your capital. But it is important to understand what this type of investing reveals.
In this blog post, we will discuss the basics of investing in large cap stocks, including how to identify them, and when they make sense as an investment.
What is a large-cap stock?
If you talk about large-cap stock then it is the latest way of investing. It is the share of those organizations that hold a market capitalization of more than Rs. 20,000 crore.
Investors want to go with it as well-established companies offer these stocks. Further, you may find that large-cap stocks also offer dividends regularly that serve as the passion income for investors.
Explore the Top 3 large-cap stocks in 2023:
If you wish for consistent growth, then investing in large cap stocks is a good strategy. These are the top three large-cap stocks that perform well:
Starbucks (NASDAQ: SBUX)
It is one of the largest and most well-known coffee companies in the world. The company has gained success at a rapid pace and still planning to establish more new stores. Therefore, you may call Starbucks a good choice for investors looking for growth potential in a large-cap stock.
The company has a strong track record of sales and earnings growth and is likely to grow at a healthy rate in the future.
Mercado Libre (NASDAQ:MELI)
Mercado Libre is a leading e-commerce platform in Latin America was founded in 1999. The Company is located in Buenos Aires, Argentina. The company operates in 18 countries and offers online and mobile commerce, payments, and shipping services through its marketplace platform.
The company has established a wide market across multiple countries such as Brazil, Mexico, and Argentina. Its marketplace platform enables users to buy and sell goods and services online.
Mercado Libre has grown rapidly in recent years. Thus as Investors, you may choose Mercado Libre stock for the growing e-commerce market in Latin America.
Walmart (NYSE: WMT)
The company occupies a reputation as the largest retailer in the world. It has over 11,000 stores in 27 countries. The company operates under a variety of banners, including Walmart Stores, Sam’s Club, and e-commerce websites such as Jet.com and Hayneedle.com.
Walmart is one of the most popular stocks for investors to buy, due to its size, diversification, and history of strong financial performance. Walmart holds a market capitalization of around $288 billion.
Read Also:- Small Cap Stocks
What are the Best large-cap funds in 2023?
You must be aware of a few things while choosing the large-stocks-cap:
- First, these are the companies with the biggest market capitalizations. They are usually household names and have been around for a long time.
- Secondly, it exists as a less volatile stock.
- And third, they offer investors a chance to participate in the growth of some of the world’s most successful businesses.
Vanguard S&P 500 ETF (NYSEMKT: VOO)
If you notice the fact about the Vanguard S&P 500 ETF, then it is one of the most reliable large-cap stocks. . The fund tracks the performance of the S&P 500 Index, which is comprised of 500 of the largest U.S. companies.
The Vanguard S&P 500 ETF has an expense ratio of just 0.04%, making it one of the cheapest large-cap stock ETFs available. The fund also offers a dividend yield of 1.9%.
Fidelity Contra fund (NASDAQMUTFUND: FCNTX)
When it comes to large-cap stocks, the Fidelity Contra fund is a great option. The fund focuses on companies with a market capitalization of over $10 billion. It has a strong track record of outperforming the S&P 500.
The Contra fund’s success is due in part to its willingness to take on more risk than other large-cap funds. This focus on growth stocks has helped the Contra fund outperform during periods of economic expansion like we’ve seen over the past decade. However, it also means that the fund is more vulnerable to market declines than more conservatively-positioned large-cap funds.
Thus, if you are looking for a large-cap stock fund with a history of strong performance, the Fidelity Contra fund is worth considering.
How do large-cap stocks differ from small-cap stocks?
Maintain consistency: Many large-cap companies enjoy an economic moat; a competitive advantage over their competitors and peers due to solid financials and an excellent distribution network.
Large-cap stocks are preferred by the mutual fund: The stocks of large-cap companies have higher liquidity as they are traded regularly on stock exchanges, such as the NSE and BSE, despite economic slowdowns.
Wealth creators: You may consider large-cap stocks if you have a time horizon of three years or more. They are wealth creators over the long run.
Costly: Due to the brand value and distribution network of the companies they represent, large-cap stocks are in high demand. This results in a higher share price for large-cap stocks.
Read Also:- Growth Stocks
How to assess top large-cap stocks?
There are a few key factors you should always consider before making any investment. Here are quick parameters which may evaluate:
Revenue and earnings: Make sure to take a look at the top line and bottom line of the company you are interested in. Are they growing? Are they consistently profitable?
Debt levels: A company’s debt levels can give you insight into its financial health. Higher levels of debt may for specific stock of a company leave you with loss. Since such an aspect can adversely impact the company’s ability to pay dividends.
Dividend history: Every people invest just to have the profits of finance. Therefore, having complete information about the dividend history of a company is crucial. You must search for both the dividend yield and the dividend payout ratio.
Valuation: When it comes to valuation, there are a few key ratios you can look at, such as the price-to-earnings (P/E) ratio and the enterprise value-to-sales (EV/S) ratio. A lower P/E ratio means the stock is cheaper relative to its earnings, while a lower EV/S ratio means the stock is cheaper relative to its sales.
Why investors should choose large-cap stocks?
You may find that Large-cap stocks hold a proven track record in terms of their features. You may go through these to analyze their importance:
- These specific stocks are less volatile than small-cap stocks.
- You know that well-established companies have the potential to deal with financial challenges if arise.
- Investors choose the large cap stocks as it offers safety and stability.
- Apart from these, various large-cap stocks aim at paying regular dividends to investors.
The above-stated factors might have provided you with enough piece of information regarding the investment in large-stock-cap. You need to learn and understand why you should choose these stocks for investment. Everyone knows that people look for investments to have financial profits. Therefore, they must know to handle the investment part to avoid any possible loss.