Beginners in the stock market, often have questions about the right stocks for investments. Investors should have sufficient knowledge to identify the right stocks for their financial goal accomplishment because the stock market involves risk inherently and risk varies from stock to stock.
Stocks classification is based on the company’s market capitalization. Stocks can be large-caps, mid-caps, and small-cap stocks. You need to understand this categorization to make informed decisions in the stock market. In this article, we will study large-cap stocks.
Companies can be categorized by the total value of their shares in the market, called market capitalization. Companies with market capitalization Rs. 20,000 Crores are known as large-cap companies. These stocks are listed at the top stock exchange globally such as Nifty 50 in India. These are matured companies that grow slower than small and mid-caps. These are leaders in the volatile markets and offer higher profits even in the volatile periods.
Large-cap stocks are traded at higher volumes and higher prices. You can invest in these stocks online through Demat account. Here should know about demat and investing through it.
Demat Account: An account that keeps your stocks and other financial securities electronically in the digital form that can be traded on stock exchanges.
How to open demat account: You need to find out a depository participant to open a demat account. You can open a demat account online using your PAN card, address proof and income proof documents.
What is Intraday Trading: You can trade large-cap stocks at the stock exchanges like NSE, BSE. If you buy and sold it within a trading session at a stock exchange, it is called intraday trading.
Characteristics of Large-cap Stocks:
Following are the characteristics that define the stocks of large companies well:
Stable Income Generator
Large-cap stocks are the shares of well-established companies and known for dividend income distributions. An investor chooses these stocks to earn a stable income in the form of dividends.
The financial statements of such large companies, known as blue-chip companies, are available for the public at their official websites. Investors can analyze Large-cap stocks before investing.
Large-cap stocks are market leaders of their respective industry with wide market recognition and financial soundness. Any news about these stocks is very much impactful to the overall market. These are operated with more market efficiency.
These stocks are less volatile therefore less risky to invest. If an investor wants to invest in less risky stocks, then large-cap stocks are a good option.
Usually, large-cap stocks are expensive than other market caps. And most of the times bound with the minimum limit to buy it.
These are the most liquid stocks because of their widespread recognition in the market and readily available investors.
Why invest in Large-Cap Stocks?
- To provide stability to your investment portfolio even in a bearish market or a market crisis
- To have a regular and stable income through periodic returns
- Make an informed decision using company financials and pick the stock that complements your investing better.
- Low capital appreciation because of less volatility to market fluctuations.
- Expensive stocks that require substantial capital
Large caps are beneficial in terms of liquidity and transparency with company financials. You can perform independent research through market data. Likewise, large-cap companies are not always ideal. Just because it’s the stock of a blue-chip company doesn’t mean it’s always a great option for investment. They have fewer growth opportunities and you have to invest funds for the long term usually. You still need to do your research properly.