What is Bluechip fund in Mutual Fund Investments?

Mutual funds are investment vehicle that are known to offer capital appreciation over the long term. Asset Management companies owning mutual funds collect money from investors sharing a common investment objective and invest this pool of funds across a diversified portfolio of securities and money market instruments. Market regulator SEBI (Securities and Exchange Board of India) describes mutual funds as “a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in the offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with the quantum of money invested by them. Investors of mutual funds are known as unitholders

Some of the major mutual fund categories include equity, debt, solution oriented, hybrid, index, gold, ETF, banking and PSU etc. These are just categories which have been further subcategorized by SEBI for investors to be able to take an informed investment decision. Large cap funds are those mutual funds that predominantly invest in stocks of companies with large market capitalization. These funds are famous among other equity funds because they invest in companies that have a reputation for being financially well established. Large cap funds are also known as bluechip funds. 

The reason several people invest in bluechip funds is because there is very less chance for these funds to underperform even in volatile markets. The fund manager picks stocks that only belong to large cap companies, thus bringing in less volatility to the fund’s overall portfolio. Bluechip funds are professionally managed funds owned by reputed Asset Management Companies. These are actively managed funds that aim to offer capital appreciation to investors over the long term. If you have a short term investment horizon then you should reconsider investing in bluechip funds. Since these are equity oriented schemes, bluechip funds tend to get affected by the daily market vagaries. There is a good chance that your bluechip portfolio may incur losses over the short term. Historically, equity mutual funds have offered decent capital appreciation as compared to other traditional financial instruments. Also, since bluechip funds only invest in stocks of companies with large market capitalization, the investor’s portfolio is less likely to face volatility due to the inclusion of bluechip funds.

If you are seeking long term capital appreciation through investments in bluechip funds, then you can consider starting a SIP. Systematic Investment Plan, abbreviated as SIP, is an easy and hassle-free way to invest in bluechip funds. If you have lumpsum cash at your disposal then you can make a onetime payment towards your bluechip funds. However, with lumpsum investment you end up exposing your entire investment amount to the vagaries of market volatility. If you do not have lumpsum amount at your disposal then you can start a SIP in bluechip funds. With SIP, all you need is to be a KYC compliant individual following which every month on a fixed date a predetermined amount is debited from your savings account and electronically transferred to the bluechip fund. If you are unsure about how much you need to invest at regular intervals to achieve your life’s ultimate goals, then you can refer to an online SIP calculator. SIP also gives investments an opportunity to benefit from power of compounding. Your small investment amounts can multiply and turn into a decent corpus in the long run.

If you are unsure about investing in mutual funds, then it is better to consult a financial advisor.