What are blue chip funds?
The highest value in poker is denominated with a blue chip. Blue chips are superior and are of high value. That’s where the stocks with high value got their name from. Blue chip stocks have the ability to yield high returns in favorable market conditions and also have the ability to withstand adverse market conditions.
Blue chip mutual funds invest in blue chip stocks. They have established businesses that have a proven track record. Blue chip companies are managed by professionals and have strong leadership. They run on established business models and are leaders in their industry. They are companies that pay a consistent dividend to its shareholders.
Why blue chip funds are needed in a portfolio?
Why should one invest in blue chip funds? Is it important to have them in a portfolio? Well, totally! Bluechip funds are stable and allow a portfolio to grow. They withstand market volatility and give stable returns. Blue chip companies are run by professionals and are market leaders in their industry. They have the capability to deliver good returns and allow an investor’s capital to grow along with that of the company.
Blue chip companies are financially strong as they are market leaders in their industry. Their share price is prone to less volatility due to a well maintained financial position. Mutual funds investing in such companies have higher growth and return.
Blue chip companies have diversified businesses. And if one doesn’t want to assume a lot of risks they are advised to invest in large cap or blue chip funds. Due to their diversified business portfolio across different demographics are geographies the risk in these companies is considerably less when compared to mid or small caps.
Strong good will
The blue chip companies are usually everyday names and people easily associate with their brands. Blue chip companies enjoy strong good will and have an edge over other companies in terms of diversity in businesses and high brand recognition.
Consistent dividend payments
Most of the blue chip companies pay regular and consistent dividends. Investing in these would be an excellent income source for the investors. Mutual funds investing in blue chip companies are a good source for regular income.
Who should invest in blue chip funds?
Conservative investors can invest in blue chip funds as their risk appetite is less. And investors who are looking for spreading out their risk by investing in less risky funds can also invest in blue chip funds as the blue chip stocks are stable and their share prices don’t fall much during a bad phase. Since the risk is less in such schemes the return will also be considerably less in it than the mid and small-caps.
The best large cap funds in the market now are:
- Reliance Large Cap Fund
- ICICI Prudential Bluechip Fund
- Axis Bluechip Fund
- HDFC Top 100 Fund
- SBI Bluechip Fund
Read on to know about these funds here.