What is blue chip mutual funds?
Blue-chip stocks meaning those companies that are well-established franchises with a proven track record, a good dividend history & a financial position.
Mutual funds that only invest in these companies are called blue chip mutual funds (they also invest a small portion in other caps for diversification purposes).
Origin of the term Blue chip
The term blue chip came from the game of poker. In Poker the highest value piece is blue in color.
Oliver Gingold, who worked at Dow Jones term this company as blue-chip in the year 1923. While standing near the stock ticker at a brokerage firm, he noticed that several stocks traded at $200 or more per share which were high in value
How does it work?
Mutual Funds with blue-chip stocks only invest in companies that are well established. These types of companies also pay a regular dividend which can be reinvested by the fund.
Blue-chip funds allow investors to benefit from the financial growth of blue-chip companies.
They may as well invest a small percentage of their portfolio in mid & small cap for diversification purposes.
Advantages & Disadvantage of Blue Chip mutual funds
- Less volatile return.
- Constant growth & stability.
- Proven track record companies.
- Companies have experienced & stable management.
- Lower return.
- Blue-chip companies can fail (eg:- Century Textiles).
- Valuation is generally high.
Blue-chip companies & mutual funds during crises
Mutual funds blue-chip companies are relatively stable during crises as they are well-established companies. These companies also suffer less as compared to other stocks & in some cases also the index.
The liquidity is also high, which means you can buy & sell easily if required.
Examples of Blue chip companies in India.
- Reliance Industries
- HDFC Bank
- HUL Ltd
- TCS Ltd & many more.
Top 5 blue chip mutual funds in India
Disclaimer:- The below scheme names are just examples, not recommendations.
|Fund name||Annual return|
|Axis Bluechip Fund||17.27%|
|Canara Robeco Bluechip Equity Fund||16.84%|
|Mirae Asset Large Cap Fund||16%|
|HDFC Index Sensex Fund||15.12%|
|Tata Index Sensex Fund||15.08%|
There are many Blue chip mutual funds in India. Investors who are risk-averse & want stable financial growth for a long period can invest in blue-chip mutual funds.
Also Read: Where to learn about the stock market?
I am not a SEBI registered investment advisor. This article is for information purposes any scheme or company name mentioned here is just for example & not a recommendation.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. The past performance of the mutual funds is not necessarily indicative of the future performance of the schemes.