Large Stock Cap Fund

Large Stock Cap Fund Name Institution of affiliation Date Large Stock Cap Fund Introduction The Global financial system faced a major upheaval in the 2008 financial crisis. The crisis stemming from poor lending practices by major banks in the financial system. The crisis showed the world how delicate the global financial system can be CITATION War09 \l 1033 (McKibbin, 2009). As a result, financial players have noted the need for diversified financial investments. These financial products typically provide the investor with a return but also guarantee the safety of the investment. Investments and savings are the bedrock of economic growth in the US. These provide needed capital for investment into the development of the economy. It is therefore critical that we have an in-depth understanding of these economic drivers CITATION Fin08 \l 1033 (Fink, 2008). The paper will therefore conduct an examination of Large Stock Cap Funds. The paper will particularly concern itself with Fidelity Large Cap Stock Fund (FLCSX). The paper will determine the efficacy of investing in the fund by studying its returns and comparing its rating across multiple platforms. Year-to-Date performance of the FLCSX fund The FLCSX is a Large Stock Cap Fund. This refers to its market capitalization. Market capitalization refers to the number of a company’s share outstanding times its share price CITATION USS14 \l 1033 (U.S. Securities and Exchange Commission, 2014). Thus, a large stock cap means the company has a large market capitalization typically above $5 Billion. These funds are typically thought to be safer for investing though they offer depressed returns and opportunities for growth compare to small Cap or Mid-Cap funds. The Year-to-Date performance refers to the performance of the fund from the beginning of the company’s financial year to the current date. This analysis allows the investor to appraise the performance of the fund in a particular fiscal year in light of the ongoing trends. However, for the purposes of the paper, we will analyze the fund’s performance in 2016 up to 30th June 2016 due to the availability of data. The fund showed a significant improvement compared to its performance in 2015. The fund grew by 1.09% in 2016 compared to -3.17% loss in value in 2015. The fund further reported capital gains of $0.296 on the dollar and a dividend payout of $0.144. The fund underperformed when compared to the benchmark index by -2.75% and the category index by -1.07%. The fund reported growth of +2.45% on 8th July 2016 prior to close of markets. The S&P 500 is a stock market index in the US that is based on the market capitalization of 500 top companies. The index due to the diversity of its portfolio can be used to determine the strength of the US economy and as a basis for comparison for other indices. The paper will compare the S&P 500 and the FLCSX index. The S&P closed the year 2015 trading at $2043.94 and begun the year 2016 at $2012.66. The S&P at the closing bell 8th July 2016 was trading at 2129.90. This represents a 1.53% growth. The S&P 500 has therefore outperformed the FLCSX fund. This can be attributed to the composition of the fund and the index. The index contains 80% of the available large cap equities. The funds’ investments in the Consumer Discretionary and Consumer Staples were depressed compared to their performance in the S&P index. Key drivers of the fund’s performance are the Information Technology and Financials market sectors providing returns of 21.39% and 20.37%. Volatility risks in the fund The fund has over the past 10 years returned positive growth results to investors with the exception of 20008, 2011 and 2015. The FLCSX Year to Date performance has resulted in the fund increasing investor’s capital by 2.45%. The fund has consistently provide returns to investors for the different types of Large Cap funds available. The FLCSX has a beta score of 1.11 indicating that the fund’s performance in the past has fluctuated more that the performance of the benchmark index. The fund has an R2 score of 0.91 and a Sharper Ratio of 0.67. The R2 shows the correlation analysis between the fund’s performance and the benchmark index while the Share ration denotes the historical risk-adjusted performance. The fund manager’s performance in light of these volatility measures has been exceptional. However, the portfolio weight is skewed in favor of some market segments. In order to generate greater returns, the fund manager should alter the portfolio weight in some market sectors. These sectors include; Health Care, Industrials, Consumer discretionary, Consumer Staples, Utilities and Telecommunication. These sectors performed poorly compared to the market average as denoted by the S&P index. The Health Care sector also has a high potential for growth with new changes as a result of the Affordable Care Act. As millions of the previously uninsured become insured, the pot...