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Blue Chip Fund

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Blue Chip Fund
October 18, 2024

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Blue chip funds are offered by mutual funds, unit-linked insurance plans (ULIPs) and other investment firms.

What is a Blue Chip Fund?

A blue chip fund invests in stocks / shares of well-established companies with credible track records of financial performance that includes among other criteria - a steady payout of dividends and profitability over the years.

Financially speaking, a blue chip is a company renowned by name or brand and needs little introduction. It offers widely-accepted products / services that command value in the market. This reflects in the company's financials like sales, profitability and dividends, among other parameters.

How Does a Blue Chip Fund Work?

Before we understand who is suited to investing in blue chip funds, let's see what defines a bluechip company and how it adds value to the investor's finances.

Blue chips owe their name to the game of poker where blue chips have the highest value.

Bluechip companies can endure economic downturns more proficiently than lesser known rivals. They can operate profitably or in the least better than the average, in the face of adverse market conditions. This contributes to their track record of growth and stability. Simply put, blue chips make for 'reliable' investments.

For the above reasons, blue chip stocks are usually less volatile compared to lesser known names. Investors prefer blue chip companies since they are known to provide stability to their portfolios. The stock price of a blue chip company usually tracks the broad market and can be expected to move in the same range. One reason for this is that the broad market indices are composed of blue chips.

Blue chip funds of both ULIPs and mutual funds are launched with the specific purpose of giving investors the opportunity to benefit from financial growth of blue chip companies.

While these funds are invested in blue chips, they may have a provision to invest outside the blue chip universe in say, mid caps or bonds or cash, for the purpose of diversification. The investment guidelines vary across ULIPs / mutual funds and investors are informed of this through product literature / company websites.

Who Is It Ideal For?

For an investor with appetite for equities and long-term goals like retirement planning, saving for child's education or marriage, blue chip funds either on a standalone basis or in a portfolio can prove useful.

FAQs on Blue Chip Fund

Q. What is the Blue Chip fund?

A blue chip fund is an Equity Scheme. It offers its investors a portfolio of shares/ stocks, which generates stable yield for a long term. Blue chip stocks are shares of well-established companies that are financially secure. These companies show a record of reliable growth and performance. Usually blue chip companies have large market capitalisations. They could also be leaders in their respective industries.

Q. Which blue chip fund is best?

The choice of the best blue chip fund can vary based on individual investment goals, risk tolerance, and market conditions. It is important to review fund performance, fees, and holdings to determine the one that fits your portfolio the best.

Q. Why invest in blue chips?

Investing in blue chips is generally considered a safer investment strategy because these companies are established leaders. They have shown stable earnings and have a history of paying dividends. They display a promise of steady growth, lower volatility, and make for a solid foundation for a well-diversified investment portfolio. Additionally, blue chip stocks are highly resilient during market downturns.

Q. What is the difference between blue chip and large cap funds?

Blue chip and large-cap stocks may be similar, but they are not identical. While they are both stocks of companies with large market capitalisations. It can be said that while all blue chip stocks are large-cap, not all large-cap stocks are considered blue chip.

Q. Is a Blue Chip investment risky?

Blue chip investments are generally considered less risky compared to small-cap or growth stocks. This is because of their stability, established market presence, and reliable performance. However, no investment is entirely risk-free. Blue chip stocks can still be subject to market risks, economic downturns, and company-specific challenges.

Q. Is Bitcoin a blue chip?

No, Bitcoin is not considered a blue chip investment. Bitcoin is a leading cryptocurrency that has a significant market capitalisation, it is not stable and does not have a long-term track record, like blue chip stocks. Cryptocurrencies, including Bitcoin, are generally more volatile and speculative as compared to blue chip investments.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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