Ten mega-cap holdings for your portfolio

Investing in the largest companies listed on the stockmarket may be less risky than putting money into smaller businesses, because the giants very rarely fail completely - but there are still reasons to be cautious.

Large companies' share prices can of course fall as well as rise; plus there is the potential opportunity cost of missing out on better returns from smaller companies.

Here, David Prosser explores what funds, ETFs and stocks can help investors gain mega-cap exposure for their portfolio.

The best funds for mega-cap exposure

One low-cost and simple option for collective fund investors looking for mega-cap exposure is a FTSE 100 index tracker, which will automatically be heavily weighted towards the largest constituents of the index.

As the rise of emerging markets taps away at US dominance, find out whether an international company's nationality even matters in:In search of global mega caps.

The cheapest options include the Vanguard FTSE 100 ETF and HSBC's FTSE 100 Index fund, where charges add up to just a handful of basis points.

For a more global option, consider Vanguard's FTSE Developed World ex UK, said Jonathan Hill of IFA Milford & Dormer. There is no shortage of active fund management choices.

Another option popular with advisers is Aberdeen World Growth & Income, where 75% of the portfolio is currently in mega caps.

David Prosser has the profit potential of the UK's biggest corporations and the world economy's global giants. To find out more, read:Invest in mega caps for safer returns.

Ross Yiend, a partner at Plutus Wealth, suggests Fidelity Moneybuilder Dividend and JPMorgan US Equity Income, depending on whether you're looking for UK or US exposure.

Four mega-cap stocks for your portfolio

Glencore Xstrata

Commodities giant Glencore Xstrata, created by the mega merger this May, is hugely powerful, said Paul Kavanagh of stockbroker Killik & Co.

"By being present at each stage of the commodities chain, the group has superior market insight and access to opportunities, particularly in emerging pinch points in the commodities chain," he said.

HSBC

"HSBC presents a good opportunity, with investors getting what they expect: a strong balance sheet, some gearing to a continued recovery in the US, strong dividend yield buttressed by plans for buybacks in 2014 and beyond," said John Napier, an analyst at Deutsche Bank.

Google

Doubters question Google's ability to continue posting phenomenal rates of growth, especially with the explosion of mobile web browsing, but there's been no sign of a slowdown so far.

"You have a company that has a great business model primarily based on advertising," said James Dix, an analyst at investment firm Wedbush.

GlaxoSmithKline

Pharmaceuticals giant GlaxoSmithKline has been hit by a bribery scandal in China, but remains one of the UK's most dependable dividend payers. Analysts at Morningstar point out that the stock is the only FTSE 100 constituent held by every single one of the 19 equity income funds ranked by Morningstar as top performers.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.