How Bluechip fund is Different from Other Equity Funds

 How Bluechip fund is Different from Other Equity Funds

The investment market is swamped with a wide range of financial products catering to investors of all types. There are traditional investment tools like bank fixed deposits (FDs) and public provident funds (PPF) which offer low risk and low returns. Such instruments are usually opted by those individuals who have a conservative approach towards investment and do not wish to expose their finances to volatile market conditions.

But if you are someone with who doesn’t mind taking some risk to increase their chances of earning some extra returns, you can consider investing in equity mutual funds. These mutual funds predominantly invest in equity and equity related instruments along with other money market instruments like government securities, corporate bonds, etc. and share the investment objective of long term capital appreciation. 

Why the term ‘blue chip’?

You musthaveheard of the bluechip, which denotes the most expensive chip in a game of poker. In the mutual fund industry, a bluechip fund signifies the financially established and stable companies that have been consistent with dividend payments and have grown wealthy over the years. Bluechip funds invest in such predominantly large companies, thus minimizing an investor’s risk, though not completely guaranteeing the same.Here are a few things which differentiate bluechip funds from other equity funds:

  • Bluechip funds invest in stocks of those companies which are traded frequently and hence are more liquid in nature. Also, bluechip funds are less volatile as these stocks have proven track record, business models and capable enough to deliver long term consistent returns.
  • Bluechip funds are likely to beat market inflation as compared to other equity funds that invest in lesser financially stable companies. Although it is true that well established companies may not provide returns as much as small cap companies who tend to have scope for growth, they tend to offer investors with steady and consistent returns.
  • Because bluechip funds invest in moneymaking and economically stable company stocks, they hold an opportunity to stand firm against volatile market conditions, thus signifying the growth and profitability of these financially esteemed companies. It is this nature of bluechip funds which also make them a viable option for anyone willing to diversify their overall investment portfolio. Diversification also means that the fund holds the potential to balance the risk of your overall portfolio.
  • These funds are ideal for bold investors who are seeking stability in their overall investment portfolio. Blue chip funds are known for their reliable nature in a market that is prone to vagaries. 

If you are someone who is seeking long term capital appreciation through safer equity investments, you can consider investing in bluechip funds. However, investors should remember that in mind that the above stated features of bluechip funds might or might not live up to their expectations every single time. And for this very reason, it is recommended that investors do not invest solely in bluechip funds and diversify their investment portfolio with other mutual funds as well.

Investment is a long journey, and investors need to have some patience if they want to increase their chances of accumulating a wealthy corpus. They need to understand that it takes time for money to grow, and it is high time that they stop bothering and let the money do the hard work. Mutual fund investments, if held for a long time period, might be able to help investors in getting a little bit closer to their ultimate financial goal. It is necessary that you try and remain calm and invest regularly. Give your investments a disciplinary approach and stay committed. Who knows, you might hold the potential to build a decent corpus in the near future.

Dana Heald

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