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What are Large-Cap Value Funds?

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  • Written By: Sunny Griffis
  • Edited By: O. Wallace
  • Last Modified Date: 17 January 2020
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Value funds, which are a type of mutual fund, invest in companies that are undervalued or under priced. Large-cap companies belong to a market capitalization division that has a value of over $10 billion US Dollars (USD). Large-cap value funds usually invest in well-established corporations that are trading at a price below its relative value and may be less volatile than riskier growth funds or small-cap companies.

Investors pool their money into mutual funds to purchase securities. Mutual funds are professionally handled by a fund manager who invests the fund’s assets according to the fund’s overall set goals. Mutual funds offer a way for investors with limited time or resources to invest in a wide array of securities, such as stocks and bonds. They also offer a quick way to diversify an investment portfolio and increase long-term earning potential.

Mutual funds are generally classified as either value or growth. Growth funds focus on investing in industries that are predicted to offer substantial growth rates. They have above average earnings and are more expensive. Value funds focus on companies that are well-established and out of the growth state.

Value funds are undervalued for numerous reasons, such as weaknesses in the industry or company. They have lower price-to-earnings ratios and offer investors regular earnings through dividends. Large-cap value funds are generally more conservative than growth funds, and historically offer higher earning potential over the long haul.

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Market capitalization, or market cap, is the total value of a company or stock. Market cap is figured by multiplying the number of shares a company has by the price per share. For example, a company that has 20,000,000 shares selling at $30 USD each, the market cap would equal $600,000,000 USD. Likewise, a company that has 3 billion shares at $55 USD each would have a market cap of $165 billion USD.

Companies can be divided into three general categories of market capitalization. Large-cap companies have a market cap value of over $10 billion USD. Mid-cap companies are valued between approximately $1 billion USD and $10 billion USD. Small-cap companies have a market cap value of less than $1 billion USD. Large-cap value funds invest in large-cap companies, also known as blue chip companies.

Large-cap value funds offer relatively stable investments and feature regular dividends. Financial advisors often counsel investors to broaden the scope of their investment choices to maximize earning potential with a comfortable level of risk. Investment portfolios should be diversified to ensure balanced growth and stability.

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