What is bluechip mutual fund: Meaning, features and benefits

Introduction

In the world of mutual funds, blue chip mutual funds are favoured by many because they emphasise stability and long-term growth. They focus on large, powerful companies to keep your money safe and growing steadily. These funds select the top companies, known as blue-chip stocks, which are like the VIPs of the stock market.

In this article, we will delve into the comprehensive guide of bluechip mutual funds, along with their unique features and advantages.

What is Blue chip mutual fund?

Bluechip mutual funds are named after “bluechip stocks,” which refers to shares of big, established companies with a track record of consistent profitability. These companies are often industry leaders, with solid fundamentals and a track record of success.

Bluechip mutual funds are a type of equity fund that invests in these big companies to provide you with stable returns. Such companies have been believed to be more resilient to bad economic conditions and are considered safe.

Types of Blue Chip Funds

There are many options for making investments in blue chip funds in India. If you want to know how to invest in bluechip mutual fund, this will help.

Large cap funds

India has a large number of publicly traded companies on various exchanges. The term “large-cap” refers to the top 100 publicly traded companies in India based on market capitalization. These funds generally invest in the stocks of large, reputable companies that have a substantial market presence.

Also, large cap mutual funds invest 80% of their assets in such blue-chip companies. Large-cap funds are considered to be less risky than mid-cap or small-cap funds, making them an appealing option for many. 

Index funds

Index funds, as opposed to actively managed funds, are passive investments that seek to replicate the performance of a specific market index, such as the Sensex or Nifty. Rather than trying to outperform the market, index funds intend to mirror the returns of their chosen index. 

Index funds are popular for their low costs and passive management style, making them an economical choice for you. Also, if you are a conservative investor, index funds are a better option than other actively managed funds. 

How does Blue Chip Mutual Funds Work?

Blue chip companies have a solid financial track record, allowing you to make good profits from them. They mostly invest in stocks that come in the top 100 as per market capitalization. To diversify the fund, they also invest some of their portion into cash and cash equivalents and bonds.

Fund managers carefully pick these shares based on their stability, attractive financials, and steady performance. 

Also, these funds are less volatile during adverse market conditions, which makes them more attractive. While such investments do not provide significant returns in the same way that riskier schemes do, they do tend to grow over time, making them an ideal option for risk-averse investors. 

Features of Bluechip Mutual Funds

Long-term investment

Bluechip mutual funds emphasise long-term investments. The fund managers want to build a portfolio that can survive short-term fluctuations in markets while still delivering consistent growth over time.

Portfolio diversification

Bluechip funds invest in a diverse range of stocks from many industries, such as IT, healthcare, banking and finance, and FMCG. This diversity reduces the risks associated with investing in any specific sector.

Quality stocks

Bluechip mutual funds differentiate themselves by the high quality of their underlying stocks. Fund managers perform extensive research to select companies with outstanding financials, solid management teams, and a track record of generating reliable profits. The concentration on quality reduces the risks associated with market volatility.

Dividend income

Many blue chip funds have a long tradition of paying dividends. So, if you are one who is looking to earn a regular source of income along with capital appreciation, these funds are an ideal choice.

Financial goals

If you are looking for long-term financial objectives, such as retirement planning or investing in a child’s education, then blue chip funds can help you achieve your objectives with minimum risk. 

Advantages of Blue Chip Mutual Funds

Here are the top advantages of blue chip mutual funds. 

Stable returns

Bluechip mutual funds frequently deliver stable long-term returns. While the funds might not achieve the same rapid growth as more risky choices, they do provide a more reliable road to wealth accumulation.

Wealth accumulation

You may invest in Blue Chip funds to accumulate wealth over the years. It enables you to invest in financially stable organisations with a proven track record of profitability. You could include Blue Chip funds in your portfolio to provide stability against fluctuating stock markets.

Liquidity

Blue Chip funds are open-ended, so you can redeem units immediately. It allows you to exit the investment and get your money back at times of financial stress.

Professionally managed

Bluechip mutual funds are actively managed by experienced fund managers who concentrate on identifying and picking high-quality stocks. You profit from the experience of these professionals, who make strategic decisions based on extensive market research.

Inflation hedge

Blue Chip stocks, which are commonly included in bluechip mutual fund portfolios, have the potential to serve as an inflation hedge. Also, bluechip funds are equity funds, which are known for their higher returns beating inflation.

Competitive advantage

Blue Chip companies generally have a competitive edge or “economic moat” that makes it difficult for competitors to emulate their success. These companies have a competitive advantage over their competitors and peers. Investing in these funds in India allows you to capitalise on this moat and receive a greater return on your investment.

Conclusion

Bluechip mutual funds illustrate the core ideals of investing: stability, quality, and a long-term view. These funds provide a reliable way to create wealth, prioritising capital preservation and consistent earnings.

So, whether you’re an experienced investor or just starting out, blue chip funds can be an excellent choice for your long-term financial goals. To learn more, read StockGro blogs. 

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