Invest in Large Cap Mutual Funds

When you want to invest in the big dogs, large cap mutual funds may be the way to go. These funds strive for the appreciation of capital through primary investments in blue-chip company stocks. Investments are chosen based on the potential for high earnings and growth. Typically, these funds invest in companies that boast market values in excess of $8 to $10 billion. However, the market-cap range can vary, depending on its source.

Understanding Large Cap Funds

Recognize that large cap mutual funds represent less risk and lower returns. This is due to the fact that large cap companies are well-researched and typically have solid histories of performance. However, this does not mean that there is no risk at all.

Know that large cap mutual fund investments are less volatile than investments in smaller companies. They may be useful for shoring up a diversified investment portfolio.

Understand that not all large cap mutual funds are created equal. Each fund has unique objectives, strategies, expenses and performance records. Carefully review available information about the funds you are considering, making certain that they are in line with your investment objectives and risk tolerance.

Understand that, due to their size, large cap funds often mimic an index, like the Standard and Poor's (S&P) 500, finding it necessary to invest in large companies that are in major market indexes. This is due to the restrictions placed on mutual funds in terms of the level of ownership they can have in one company. Typically, they are permitted to have no more than 10 percent ownership in any company.

Recognize that there are both large cap income funds, concentrating on returns with lower risk, and large cap growth funds that focus on capital appreciation while keeping risk manageable. Research the funds best suited to your investment objectives.

Choosing a Fund

Consider your time horizon and your investment objectives.

Discuss large cap funds with a financial adviser. With this person's help, decide how much to invest in large cap funds to stay true to your investment objectives.

Use MorningStar.com or LipperWeb.com to find, research and compare large cap funds.

Request and review the prospectuses of several attractive large cap funds. Decide the funds in which you'd like to invest.

Determine the amount you want to invest in the large cap funds of your choice.

Purchase shares through an investment adviser or contact the funds directly.