What Are The Factors To Consider When Investing In Blue Chip Funds?

What Are The Factors To Consider When Investing In Blue Chip Funds?

There are different types of mutual funds available in the market, one of them being blue chip funds. Blue chip companies are known for their solid track record of performance and high market value.

Rahul MUpdated: Thursday, May 23, 2024, 11:24 AM IST
article-image

New investors may find it challenging to understand mutual funds. However, before investing in any mutual fund, investors must understand the details of the fund. There are different types of mutual funds available in the market, one of them being blue chip funds. Blue chip companies are known for their solid track record of performance and high market value. As a result, new investors may seek to invest in blue chip funds to build a strong portfolio that may outmatch inflation. However, before investing in a blue chip fund, investors need to consider several important factors. In this article, we will understand what a blue chip fund is, its benefits and factors to consider.

What is a Blue Chip Fund?

Blue chip funds are equity mutual fund that majorly invests in the stocks of well-established large-cap companies. These blue-chip companies have a proven track record of consistent performance and financial stability. The blue chip companies are also known to be industry leaders with strong brand recognition and a history of paying dividends. Reliance Industries, Tata Consultancy Services, HDFC Bank, and Infosys are some examples of blue-chip companies. If you invest in a blue chip fund, it allows you to have a diversified portfolio of these reputable companies. They may provide stability and long-term growth prospects for your investment portfolio.

Factors to Consider When Investing in Bluechip Funds

Investing in blue chip funds requires thorough research. Therefore, you have to keep these factors in mind while investing in blue-chip funds.

1. Fund Performance and Track Record

Investors need to track the fund’s performance timely, such as one year, three years, or five years since launch. The quality of the fund can be understood by consistent performance in comparison to its benchmark index and peer group.

2. Fund Manager's Experience and Expertise

The fund manager plays an important role in the success of a blue chip fund. One should look for a fund manager with a proven track record who manages blue chip funds and has knowledge of the companies and sectors in which the fund invests. An experienced and skilled fund manager can understand market fluctuations and make informed investment decisions.

3. Investment Strategy

You need to understand the fund's investment strategy. Investors should see whether it follows a value-oriented approach or a growth strategy. You can match your investment goals with the fund's strategy to make an informed decision.

4. Portfolio Diversification

It's important to know the level of diversification of a portfolio. A blue-chip fund that is well-diversified has exposure to multiple sectors and industries. It spreads the risk by investing in various sectors.

5. Expense Ratio

The expense ratio is the yearly fee the fund house charges to manage the fund's assets. A lower expense ratio could have a big impact on your long-term returns. By comparing the expense ratios of different blue chip funds, you can choose funds with an appropriate expense ratio based on their performance.

6. Investment Period and Risk Profile

Blue-chip funds are often thought to be less risky than mid-cap or small-cap funds because they invest in well-established companies with stable financials. However, it's important to ascertain your investment period and risk tolerance before investing in a blue chip fund. If you have a lower tolerance for risk or a shorter investing period, a blue-chip fund may tend to be a suitable fit for you.

Benefits of Investing in Blue Chip Fund 

Blue chip funds offer many benefits to an investor. Some of the benefits of blue chip funds are as follows: 

● Capital Development

Investing in blue chip funds can help you collect a significant amount of cash over time. Investing in a company that has a proven track record opens up opportunities for building a strong portfolio. It also offers steadiness during volatile stock market conditions.

● Financial Objective

Investing in blue chip funds can help achieve long-term financial objectives. Investors can access these types of mutual funds through the Axis mutual fund app. In addition, they can achieve their objective by doing SIP investing through the SIP app.

● Stability

Investments from a blue chip mutual fund can be withdrawn whenever you want. Additionally, you can apply for a loan secured by units of blue-chip funds.

Conclusion

Blue chip funds can be quite helpful in making an appropriate investment strategy. Investors get access to reputed companies that have the potential for consistent, long-term growth. However, it's important to conduct in-depth research, understand your investment goals and risk tolerance, and get expert advice. By doing your homework and making an informed decision before investing in blue chip funds, you may increase your chances of success. Remember that investing is a journey, and patience and discipline are needed to achieve your financial goals.

Note: Views and opinions contained herein are for information purposes only and should not be construed as investment advice/ recommendation to any party or solicitation to buy, sale or hold any security or to adopt any investment strategy. It does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The recipient should exercise due caution and/ or seek professional advice before making any decision or entering into any financial obligation based on information, statement or opinion which is expressed herein.

Past performance may or may not be sustained in future.

Mutual Fund Investments are subject to market risks, read all scheme-related documents carefully.

RECENT STORIES

Maruti Suzuki Fronx Hits 1.5 Lakh Sales Mark, Anticipates Hybrid Model Launch

Maruti Suzuki Fronx Hits 1.5 Lakh Sales Mark, Anticipates Hybrid Model Launch

NCLT Orders Insolvency Proceeding Against Supernova Project Developer Supertech Realtors

NCLT Orders Insolvency Proceeding Against Supernova Project Developer Supertech Realtors

Karnataka Government Hikes Sales Tax On Petrol And Diesel, Prices Set To Surge

Karnataka Government Hikes Sales Tax On Petrol And Diesel, Prices Set To Surge

Stock Market Weekly Round-Up: Check Out Indices Performance, Sectoral Gains, And Key Economic...

Stock Market Weekly Round-Up: Check Out Indices Performance, Sectoral Gains, And Key Economic...

PM Modi To Release ₹20,000 Crore Under PM KISAN Scheme In Varanasi On June 18

PM Modi To Release ₹20,000 Crore Under PM KISAN Scheme In Varanasi On June 18