Understanding the Risk-Return Matrix of Bajaj Finserv Large Cap Fund

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Bajaj Finserv Large Cap Fund is designed to capitalize on the stability and growth potential of large cap stocks. Large cap companies, characterized by their significant market capitalizations, are often leaders in their respective industries.

These companies typically demonstrate stable earnings and strong fundamentals, making them a suitable option for investors seeking steady returns over long term with lower volatility compared to smaller companies.One of the distinctive features of Bajaj Finserv Large Cap Fund is its concentrated portfolio strategy. The fund managers have chosen to invest in approximately 25 to 30* carefully selected stocks.

This approach is rooted in research that suggests holding a moderate number of stock (20 - 30) provides significant diversification benefits. By spreading investments across a limited number of high-conviction stocks, the fund aims to reduce portfolio-specific risk while potentially optimizing returns.Modern Portfolio Theory (MPT) was introduced by Nobel laureate Harry Markowitz.

MPT emphasizes diversification to optimize expected returns for a given level of risk. The theory suggests that by combining assets with different risk and return profiles, investors can achieve a more efficient portfolio that balances risk and reward.Bajaj Finserv AMC applies MPT principles by constructing a portfolio that balances the expected returns of large cap stocks with their associated risks.