Investing in top large-cap stocks and funds can be rewarding, as they are less volatile than small-caps and generate good share price appreciation over time. As we discussed earlier this week, a large-cap stock is a publicly traded firm’s stock whose value exceeds $10 billion. In addition, these firms are typically established giants with leading positions in their industries.

Best large-cap stocks

Here are our recommendations for some of the top large-cap stocks to diversify your portfolio.

Starbucks

Starbucks (NASDAQ:SBUX) has outperformed the broader market since its 1992 initial public offering (IPO) and appears poised to keep growing market share as it recuperates from the epidemic. As a result, Starbucks is a good illustration of a large-cap stock with growth potential. That potential includes locations in China, digital, delivery, and consistent profit streams. In addition, the company boasts several competitive strengths, including a well-known brand, successful loyalty programs, and technology projects like Mobile Order & Pay.

Starbucks has undergone several difficult obstacles, including a pandemic lockdown in China, a unionization push, and tight labor market competition in the U.S. However, they have triumphed before and with a new CEO at the helm, should do so again.

The company started paying a dividend in 2010 and has raised it yearly, giving it the potential to become a Dividend Aristocrat.

MercadoLibre

MercadoLibre (NASDAQ:MELI), Latin America’s expansive e-commerce website, is a perfect model of a flourishing big company. With its major e-commerce company and shipping network in MercadoEnvios, MercadoLibre has many parallels to Amazon. However, it also offers unique Latin American solutions like brick-and-mortar merchants’ services by providing point-of-sales machines for physical stores.

The other is MercadoPago, a component that offers fast money transfers through its payment platform. It began as a service similar to PayPal (NASDAQ:PYPL) for customers before growing into a multinational bank in Latin America. For example, customers use MercadoPago to pay for things like groceries and gas.

Walmart

Walmart (NYSE:WMT) is not only the world’s largest retailer but also the company with the highest revenue. A few of its competitive advantages include: economies of scale, a well-known reputation for low prices, and stores close to 90% of America’s population.

One of the things that sets Walmart apart is its ability to adapt and move into new industries. For example, by adding health clinics to its stores, Walmart is now a significant player in the healthcare industry. This shows that Walmart is more than just a retailer. It’s a company that can change with the times and succeed no matter what industry it’s in. For example, in early 2021, Walmart launched a fintech startup and poached two executives from Goldman Sachs (NYSE:GS) to lead it. As a result, the company has built a robust e-commerce business that ranks second in the U.S.. That gives it an influential voice in a rapidly growing market. If Walmart continues this trajectory, it will be unrecognizable in five or ten years.

With Walmart’s well-known reputation for low prices, it is a large-cap stock that can weather any economic recession or downturn.

Best large-cap funds

If you’re not enthusiastic about picking out individual large-cap stocks, don’t worry. You can get portfolio exposure to the most prominent companies by investing in exchange-traded funds (ETF) or mutual funds. Some good large-cap focussed fund options are:

Vanguard S&P 500 ETF

Vanguard S&P 500 ETF (NYSE:VOO) is an ETF that follows the performance of the S&P 500 (^GSPC). The first index fund was created by Vanguard in the 1980s, and S&P 500-tracking funds are still the most widely used. In addition, the fund is extremely low-cost, with an expense ratio of just 0.03%. That makes it a fantastic choice for investors who want to invest in top large-cap stocks via a passive approach.

Fidelity Contrafund

The Fidelity Contrafund (NASDAQ:FCNTX) is a mutual fund that primarily invests in large-cap stocks and mega-cap stocks, emphasizing those companies whose earning potential looks good for the long run. With an expense ratio of 0.86%, it costs more than the average index fund. However, there is an active manager who hopes to produce better results than can be achieved by following the S&P 500. As a result, Contrafund investors theoretically should do well enough to make up for the higher fees. In fact, over the past five years, this has been borne out by reality. The Fidelity Contrafund beat the total return of the S&P 500 stock index for the last five years.

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