Large cap mutual funds tend to follow a slightly different economic cycle than either a small or mid cap mutual fund. Owning many types of funds in a portfolio will result in a more diversified portfolio. Doomsayers may say what they want but the markets have more than doubled since March of 2009. That means the present market rally is over three years old. Large caps funds tend to do the best latter part in a rally.
Large cap funds are the one category where I recommend index funds or even exchange traded funds (ETF). I will first I will discuss specific recommendations for index and exchange traded funds. Later I will make recommendations for managed funds.
The reason I like index funds in the large cap area is that it is hard for a fund manager to outperform the market with a choice of only a few stocks. An index fund has low expenses and will outperform 80 percent of all funds according to statistics.
Many times in a 401K plan index funds are the investment vehicle of choice. I have reviewed plans which have zero expense ratios in some 401K plans.
A great choice is the Fidelity Spartan 500 Index. The fund symbol for this fund is FUSVX. The Fidelity Spartan 500 Index fund has an extremely low expense ratio of only 0.07 percent. That is 70 cents on per thousand dollars per year.
Another fine choice is the Vanguard 500 index fund symbol VFINX. This fund has a slightly higher expense ratio of 0.17 percent which is very small.
A important aspect of an index fund is that an investor does not have to worry about the size of the fund. A large cap index fund historically is going to beat over 80 percent of the managed funds. Many times in your 401K an index fund is your best choice. I have seen plans where the expense ratio in a 401K is zero.
Exchange traded funds are also a very good choice for investing in the large cap area. The fund symbol QQQ which is the proxy for the NASDAQ 100 and symbol SPY which is the proxy for the S&P500. I like these funds because they can be bought and sold anytime even after hours. An investor can use stop and limit orders to control their gains and losses. The down side of these funds is that a commission must be paid when buying or selling these funds in most cases. I also do not like the fact that many investors are tempted to become traders. Most amateur traders do not do well in the market.
My first recommendation is the Wells Fargo Advantage Growth symbol SGROX: This fund is up almost 8 percent per year over the last 10 years where the markets are down. Thomas Ognar has managed this fund for those years and piled up a great record.
Yacktman Fund symbol YAFFX: This fund is up 11.09 percent per year over the last decade. This is a focused fund with very limited holdings. I like this fund but I would not put over seven percent of my money here.
A fund that is classified as a large cap fund by Morningstar but has a lot of mid cap and international stocks in it as well as bonds is the Gabelli Asset Fund. The fund symbol for this fund is GABAX. This fund has been my largest fund holding for almost 15 years and it is one fund choice I have never regretted owning. Manger Mario Gabelli has run this fund since 1986. The fund has been up almost 12 percent per year over that time. To give you an idea of just what that means to you a $10,000 investment on March 3, 1986 is now worth $194,415.72! This fund is a well diversified fund and I have been saying for years if you own one mutual fund (which I do not recommend) own this one!
My last pick is a new fund run by a very experienced manger. The Akre Focus Fund symbol AKREX is up over 16 percent over the past year, when the market is only up 5 percent.
I preach a lot in my daily life about the importance of sound investing. Most people think that putting money in their 401K is good enough. It is not! If you wish to save why not put your hard earned money in the best investments?
As time passes investments change so should you and your investments.. My old article The best large cap funds is still a great reference.