A Bluechip fund is a term used to indicate investments in stocks of well-established and financially sound companies. These companies have a credible track record with sound financial performance. Along with regular dividend payments and profitability over the years. The mutual funds investing in bluechip stocks or shares are also known as Bluechip Fund.
In the market terms, a bluechip is a company renowned by its name, brand or goodwill and doesn’t need much introduction. The products it offers are widely-accepted, that command value in the market. This reflects in the company’s books. Such as sales, profitability, and dividends, among other parameters. With several years of profitable operations.
The term “Bluechip” comes from the game of poker. In which the bluechip is the most expensive chip in the game. This term is also very prevalent in the stock market to classify funds.
The stocks of such companies are known as bluechip stocks.
What are Bluechip Funds
Generally, the market capitalization of these well-established companies is in crores. Most often these organizations are leaders in their particular sector. A lot of the bluechip companies are household names. They deliver products and services that are highly demanded in the market, or the quality is specific to them.
In a nutshell, investing in any bluechip company’s stock makes the safest and the most reliable investments. This is because these stocks are much less volatile than those of the smaller players in the market. And investors prefer them over the smaller companies for their stability.
Features of Bluechip funds
Putting your money in bluechip investments are an excellent way to achieve steady growth of your investment portfolio. They provide steady growth of the investor’s portfolio.
Here are four distinctive features of these investments:
- These funds have a significant advantage over other funds as they can tide over market volatility.
- They boast of superior and sustainable cash flows indicative of past performances.
- They have stable, skilled, qualified and experienced management that expertly governs the company’s operations.
- They also hand-out regular dividends to their investors, providing them with a steady income.
- Bluechip funds are available at a somewhat higher price. So the investors should understand the valuation of those funds before investing in them. Therefore, the returns would not be on the higher side.
- Bluechip funds should ideally be a part of the portfolio but not a complete portfolio.
Some Examples:
Some of the Blue chip funds in India:
- Franklin India Bluechip Fund
- Aditya Birla Sun Life Frontline Equity Fund
- HSBC Large Cap Equity Fund
- Sundaram Select Focus
- SBI Bluechip fund
How Does Blue Chip Funds Work
Bluechip funds allow investors to benefit from the financial growth of bluechip companies.
These types of mutual funds are invested in bluechip stocks of large stable corporates. Though they can also be invested outside that category. These funds can be invested in mid-cap stocks, in bonds, or in money market instruments. To diversify. The investment guidelines may vary from one fund to another and it is suggested you check the product brochure or the website to procure detailed information.
Younger investors, with their long investment horizon, can bear the risk factor which comes with investments in stocks. They can have a bigger part of their portfolio invested in stocks and equity. Older investors, who prefer a safer approach and capital preservation, can also choose these to get steady returns.
Bluechip funds are known for taking market downfalls better than lesser-known companies. When faced with unfavorable market conditions, the Bluechip can perform considerably better. These companies are able to operate profitably and better than average market performance even in adverse markets. It indicates their growth and stability. These types of funds offered by Asset Management Companies have a specific objective. It is to provide investors with the opportunity to earn returns through the financial growth achieved by bluechip companies.
The stock price of a bluechip company usually follows the broad market and can be expected to move in a similar range. One reason for this is that the broad market indices are mostly composed of blue chips.
Bluechip funds of both ULIPs and mutual funds are launched with the specific intent of allowing investors to profit from the financial growth of bluechip companies. You can invest in both Blue chip funds and Blue chips ULIPs to reap in the benefits.
Read here about: ULIP vs Mutual Fund vs PPF: Which is Better
When these funds invest outside the bluechip space, for example, in mid-caps or bonds or cash, for diversification. The investment guidelines differ for each ULIP/mutual fund and investors are informed about this through product prospectus, other literature/company websites.
Who Is It Suitable For
As compared to other types of mutual fund schemes, these plans are slightly more expensive. Therefore, it is important that you clearly understand the working of these funds before investing.
It is advised that you include these types of mutual funds within your overall portfolio but also diversifies across other holdings. If there are only blue-chip funds in the portfolio, you may get steady earnings but the returns would not be high.
You may invest in mid-cap or small-cap funds to build wealth over the years. Whenever these investments face volatility, the impact gets rebalanced through your bluechip holdings to stabilize the performance of your mutual fund portfolio.
If you are willing to take a high or medium risk, consider investing in sectoral funds to achieve diversification.
Investing in these types of funds should be for the long-term. Therefore, can help you achieve long-term objectives, such as your children’s education, their wedding, or to build your retirement corpus.
For an investor with an appetite for equities and long-term goals like retirement planning, saving for a child’s education or marriage, bluechip funds can prove useful.
Summary
There are many Bluechip funds in India that are well-known for their consistency and growth rate. Simply put, bluechip make for ‘reliable’ investments. Investing in such funds is a good investment plan. Especially for risk-averse investors, who are looking for a steady return and dividend from their investments.
But don’t forget, all investments have some kind of risk attached. Even keeping the money idle at home or in a savings account has its own related risks. And though we know bluechip companies usually survive and perform well even during chaotic times, that may not be the case all the time. The bankruptcies of larger corporates such as General Motors, Lehman Brothers and many other leading bank companies during the recession of 2008 are proof that sometimes, even big can fail. A more recent example of Jet Airways is also there.
With so many options of bluechip funds to invest in. Finalizing the right one for your money is an intimidating task.
Therefore, it is advisable that you take the help of professionals. Therefore, it is advisable that you let WealthBucket assist you. Let us help you out in short-listing and personalizing your investment.
Some of our services are Equity Mutual Fund, Debt mutual fund, Large Cap mutual fund or Multi-Cap mutual fund.
Do call us at +91 8750005655. Or you can mail at contact@wealthbucket.in.
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