Blue chip funds are funds that invest in blue-chip stocks. These are the shares of long-standing, profitable companies. Also, this page explains bluechip fund with examples, features, types, advantages and other topics.
On the contrast read different types of debt funds as a part of additional alternative investment for your learning and research purpose. Besides, blue-chip funds help investors earn long-term capital growth by investing in stocks. Even conservative investors may be drawn to the regular returns and investments of blue-chip mutual funds.
What is Bluechip Fund?
“Blue chip funds” invest in the equities of significant corporations. These are well-known and long-running businesses. Moreover, blue Chip funds are not include in SEBI mutual fund classification rules. “Blue Chip” refers to “large cap funds.”
A blue-chip fund provides investors with a portfolio of high-performing stocks. These funds may not make as much money in a bull market, but they lose less money in a bear market. They are useful in an emergency, improve portfolio quality, and reduce risk. A blue-chip fund invests in companies that have a long track record of producing reliable results. Low-risk investments
For example, “Blue Chip Emerging” mutual funds. These are “Blue Chip” companies that are large and medium-sized. Adopting a scheme only because it’s “Blue Chip” is a bad idea. SEBI requires that 80 percent of large-cap funds invest in the top 100 companies by market capitalization. The same rules apply to the top-100 Blue Chip funds.
How Does Bluechip Fund Work?
Bluechip mutual funds and high cap mutual funds are the same thing. They are equities mutual funds that are open-ended. Eighty percent of their money is invest in large corporations. The top 100 corporations are refer to as “big cap enterprises”. The fund’s managers select large-cap stocks that meet its investing objectives. When large-cap companies grow, these funds benefit.
The remaining 20% is invest in a variety of assets by the fund’s management. Portfolio managers invest in mid-cap equities, bonds, and cash equivalents. Despite the fact that they exclusively invest in stocks, these funds are less volatile than mid-cap, small-cap, value, and so on.
The fund’s portfolio is kept stable by investments in large corporations. Another, long-term investments in large-cap or “bluechip” mutual funds can be profitable. These mutual funds necessitate a long-term investment strategy. Debt funds are investments that are held for a short period of time.
Examples of Blue Chip Funds
Most mutual fund managers and fund companies in India refer to large cap funds as “bluechip”. The term “bluechip” refers to numerous large-cap mutual fund strategies. Well-known “bluechip” funds include Axis Bluechip Fund, ICICI Prudential Bluechip Fund, and SBI Bluechip.
Most blue-chip US mutual fund advisors and schemes also use “emerging” technology. These are two “blue-chip” companies, one large and one medium-sized. Fidelity Blue Chip Growth Fund, ICICI Prudential US Bluechip Fund, and others.
Features of Blue Chip Funds
Blue-chip stocks generate profits and add to an investor’s portfolio. However, blue-chip corporations have high sales and yields. They are dependable and secure. Blue-chip funds are growth investments. Let us understand the features of bluechip funds investments:
Guaranteed Money Back
Blue-chip firms pay dividends every three months. Moreover, most investors place their trust in long-standing businesses. Safe investments provide consistent, guaranteed profits.
Debt Repayment and Growth
Blue-chip companies can simply pay their bills. Therefore, the shares of these companies are extremely creditworthy. Blue-chip firms have hit the limits of their expansion. Blue-chip stocks suffer as they grow slowly but gradually.
Risk in Bluechip Fund
Blue-chip stocks are less hazardous because they are issued by large, financially secure firms. Diversification mitigates the danger of investing in blue-chip stocks.
Spending on the Sidelines
The majority of investments have a seven-year term. Blue-chip is a long-term investment that can help you achieve your financial goals. These blue chips tend to cost more based on their PE ratios because they are in high demand. Blue-chip funds are popular among investors because they have a track record of performance. This is especially common in large corporations.
Taxation on Blue Chip Funds
In addition, blue-chip stock gains are tax under Section 80 C of India’s Income Tax Act. Short-term gains are tax at 15%. Long-term gains in excess of Rs. 1 lakh are taxed at 10%.
Types of Blue Chip Funds
Blue chips reduce risk and diversify a portfolio by being consistent. Profitable, with little risk and regular growth. There are also three types of bluechip funds or ETFs.
Large Cap Funds
Please explain why. Large funds typically invest in the top 100 companies. Also, this shields them from SMBs. Many large-cap firms provide lower returns with lower risk.
On the other hand, large cap funds spread risk by producing the most lucrative portfolio for a given level of risk. Large funds must outperform the Nifty by a sufficient margin to cover their higher TEF (TER).
Index Bluechip Fund
These are passive funds whose goal is to earn the same amount as the index. Index funds provide comparable results because they build portfolios based on the index’s weights. As a result, an index fund manager must minimize tracking error. Index funds that are less expensive are advantageous.
Mix of Large and Mid Cap Funds
Market capitalization of large-cap firms exceed $10 billion. A mid-cap company is worth $2 billion. These funds make investments in the top 250 companies. This lowers portfolio risk. Moreover, blue chip mutual funds can assist you in saving for college and retirement. Blue-chip funds are suitable for funding such goals.
Advantages of Blue-Chip Funds
Over time, Blue Chip funds save money. So, it enables you to invest in dependable, successful businesses. Blue Chip funds might assist you in weathering market volatility. Blue-chip funds can assist you in building wealth. In addition, it enables you to invest in dependable, successful businesses. Let us view the advantages of bluechip funds below.
Budget in Bluechip Fund
Consider Blue Chip funds to help you achieve your long-term financial goals. So, you can utilise Blue Chip money to buy a property or save for retirement.
Moat in Blue Chip Funds
Blue Chip corporations might have a moat. These businesses enjoy a competitive advantage. It provides you with a big market share as well as returns that outperform inflation.
Liquidity in Bluechip Fund
Blue Chip funds have no expiration date and allow for quick withdrawals. When money is tight, selling is simple. Units of Blue Chip funds can be collateralize.
Things to Remember Before Investing in Bluechip Fund
Blue chips provide smaller returns than mid- and small-cap stocks, but they are less risky. Most blue-chip stocks have consistent dividend policies, so investors know what to expect.
The Legacy of AMC
Before investing, look at the AMC’s track record. Large Blue Chip funds are beneficial (AUM). These funds can handle sudden money-back requests from investors.
Choose funds based on how they are investing that correspond to your preferences. Moreover, the management of a fund may take a growth, value, or mixed approach.
Blue Chip finances with modest spending are required. It is a fund operating expense. A lower expense ratio may enable you to make more money over time.
Assets of Bluechip Fund
The portfolio of the Blue Chip fund reveals where your money is placed. Instead, ascertain that the large-cap fund meets its objectives. Blue Chip is an oxymoron. Also, these funds are intend for large and medium-sized companies. Look over the portfolio.
Performance that is Consistent
Look at Blue Chip’s performance during the last 3–5 years. Blue Chip funds have consistently surpassed both their benchmark and their rivals. Mutual fund portfolios are comprise of high-performing Blue Chip funds chosen by professionals.
Investors should examine the mutual fund cost ratio, exit burden, and tax implications before investing. Before investing, understand how these funds are valued. To maximise your returns, diversify your investments. Before proceeding, examine your financial objectives, risk tolerance, and time horizon. For a different perspective on equity shares topic, read this insightful analysis.