Large cap mutual funds are generally comprised of the heavy hitters on the market. Understand that a mutual fund is a collection of shares held in various corporations. A person who invests on behalf of a mutual fund is known as an institutional investor. These investors find companies to put money in. They hope that share values increase or that the company performs well enough to provide a divided.

Unlike small cap mutual funds, large cap funds focus on companies with large market shares. A mutual fund that invested in Walmart, General Electric and Johnson and Johnson would be considered a large cap fund. That’s because all of these companies have market shares that exceed $8 billion dollars. Generally speaking, $8 billion or more is what distinguishes large cap funds from midsize to small cap funds.

Investing in a large cap fund has its benefits. For example, you can rest assured that you will know where your money goes. It is helpful, for example, to know that the plane you fly on may be powered by General Electric jet engines or that it is a Boeing aircraft (a large cap stock). Often times, such companies are “too big to fail” such as the example of General Motors or AIG. These large corporations are a cornerstone of the stock market. They may not do well every year but they will neither vanish overnight.

So why invest elsewhere? Well most large cap stocks have limited opportunities for growth. Every Apple, Microsoft or Hewlett Packard started in a garage. While all of these are technology related companies – that is the point. By investing in large corporations, you are investing in what is the status quo. There are benefits in that, to be sure, such as steady returns. However, for dramatic profits, you have to bet on smaller companies. The greater the risk, the greater the reward, as the saying goes. That idea applies to investing as well.

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