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Growth, Value, Blend: Which Large-Cap Fund Should You Invest In?
Large-cap funds are always the safest bets for risk-averse investors. These funds invest primarily in large-cap stocks, which not only have a long-term performance history, but also assure an investor of more stability compared to mid-cap or small-cap companies. More often than not, the large-cap funds tend to duplicate the benchmarks like the S&P 500. These funds are ideal for investors with a long-term investment goal.
Companies with market capitalization of more than $10 billion are generally considered large cap. Large-cap funds can be classified under growth, value and blend funds. Each of them has their own fund objective, and caters to different investors. Lets look at what each of these fund categories has to offer to investors.
Growth funds offer incremental gains on capital by investing in stocks of companies that are projected to rise in value over the long term. However, relatively higher tolerance for risk and the willingness to park funds for the longer term are necessary when investing in these securities. This is because these may experience relatively greater fluctuation than the other fund classes.
Large-cap value mutual funds provide excellent choices for investors who seek returns subject to low risk. While mutual funds investing in value stocks have the potential to deliver higher returns and exhibit lower volatility compared to growth and blend counterparts, large-cap funds usually provide a safer option than small-cap or mid-cap funds.
Value funds generally invest in stocks that tend to trade at a price lower than its fundamentals (i.e. earnings, book value, debt-equity) and pay out dividends. Value stocks are expected to outperform the growth ones across all asset classes when considered on a long-term investment horizon and are less susceptible to trending markets.
When compared to small-cap and mid cap funds, blend funds provide significant exposure to both growth and value stocks. Blend funds, also known as hybrid funds, aim for value appreciation by capital gains. It owes its origin to a graphical representation of a funds equity style box.
Meanwhile, large-cap blend funds have exposure to large-cap stocks, providing long-term performance history and assuring more stability than what mid-caps or small-caps offer.
We will suggest here the top large-cap funds from each category.
These funds carry a Zacks Mutual Fund Rank 1 (Strong Buy) as we expect them to outperform its peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund.
The funds are among the top gainers so far this year. They also carry no sales load and have a low expense ratio.
TIAA-CREF Growth & Income Fund Premier ClassTRPGX invests a large chunk of its assets in equity securities that have the prospect of dividend income, capital appreciation or both. The fund invests mainly in securities of large-cap companies that have strong growth potential.
This Zacks Sector-Large Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TRPGX has a Zacks Mutual Fund Rank 2 and an annual expense ratio of 0.55%, which is below the category average of 1.07%. The fund has year to date and three-year returns of 18.9% and 12.1%, respectively.
Payden Equity Income FundPYVLX invests most of its assets in large-cap value stocks that have above average dividend yields. The fund also invests in other income-producing equity securities that may include exchange-traded common stocks and REITs. The fund mostly invests in domestic securities. A maximum of 30% of its assets may be invested in non-U.S. securities.
This Zacks Sector-Large Cap Value product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PYVLX has a Zacks Mutual Fund Rank 2 and an annual expense ratio of 0.74%, which is below the category average of 1.00%. The fund has year-to-date and three-year returns of 19.4% and 10.2%, respectively.
TIAA-CREF Social Choice Equity Fund Retirement ClassTRSCX seeks high returns over the long run that highlight the performance of the entire U.S. stock market, indicated by the funds benchmark, the Russell 3000 Index. TRSCX attains its ESG criteria by investing in companies included in its benchmark.
This Zacks Sector-Large Cap Blend product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TRSCX has a Zacks Mutual Fund Rank 1 and an annual expense ratio of 0.42%, which is below the category average of 0.95%. The fund has year-to-date and three-year returns of 17.9% and 11.7%, respectively.
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