A bluechip mutual fund, which is known for its long-term returns and good performance, invests in shares and stocks of large capital companies (large-cap stocks). These are a little less risky than the mid-cap and small-cap funds. A bluechip stock record of paying dividends regularly shall have a Market Capitalization (MC), of more than Rs. 1000 crore. MC is attributed to the 'number of shares issued by the company' X 'market price per share'. According to SEBI regulation, a bluechip fund is obliged to invest 80% of their total portfolio in the top 100 companies of the equity market by MC, strengthening the chances of good returns. As the equity indexes rise, these stocks perform well, transferring the same profits to the bluechip funds.
When the parent company is well established and has a stronghold over the market, is expected to perform well in the equity market, even during a doom period. Historically, these funds will perform well, but before investing in any bluechip fund, the market performances of the last 3 to 5 years, and last year's performances should be dissected. This will give a better outlook about the stocks or funds that an investor needs, along with a little more assurance about it.
Why is bluechip fund important for mutual funds and SIPs?
When a fresh investor starts to look out for mutual funds, he/she will be skeptical initially. Mutual funds and Systematic Investment Plans (SIPs) are directly related to the stock market or equity market. Hence the volatility is way more prominent than assured investment options like FD or PPF. So, when a new investor is stepping into the field, should be more cautious about stable earnings from the plan. Bluechip funds like SBI Bluechip or Axis Bluechip, Mirae Asset Emerging Bluechip Fund, and Parag Parikh Flexi Cap funds are highly chosen by newcomers to understand the market first. These mutual funds invest in the stocks of large-cap companies that have performed well historically. So, if the large-cap stocks perform well, eventually the mutual fund or SIP will give better returns too. Investing in bluechip funds will give dividends and capital appreciation.
SIP, on the other hand, is preferred by people who are mostly engaged in regular monthly income jobs. They are interested to explore the equity market, but cannot spend a lump sum at once. These fresh investors are likely to lose motivation from the market if the fund does not perform well. So, people who are starting to invest regularly in SIP can take a little less risk than the traditional investors or traders. The bluechip fund will be the savior in the initial phase of their investment, as these funds are recommended for risk-averse investors.
Investment tenure suggestion for a bluechip fund
Investors, new or traditional are likely to check the performances of the funds regularly, or even daily. If the fund performs poorly in a one-month gap, they tend to lack hope. But in the case of large-cap or bluechip funds, the approach should be the exact opposite. Through mutual funds or indirect stocks, the tenure of investment in a bluechip stock is recommended to stay put for more than 5 years. These funds always perform well on a long-term basis, like other assets. These funds are popularly chosen for retirement planning, or other big investments like marriage or a child's higher education, etc.
Top 4 performing bluechip funds in India
|Fund||Nav (INR)||Net Assets or Asset Under Management (AUM) (INR)||Expense Ratio||Return for 2020||3 years' return||5 years' return|
|Canara Robeco Bluechip Equity Fund||42.3||3,679 crore||2.56%||23.10%||19.60%||17.20%|
|Axis bluechip fund||46.72||29,161 crore||1.86%||19.70%||18.60%||17.80%|
|BNP Paribas Large Cap Fund||140.52||1,129 crore||2.30%||16.80%||17.40%||14.30%|
|IDBI India Top 100 Equity Fund||39.57||486 crore||2.66%||16.40%||17.60%||13.50%|
(NAV as of September 15, 2021, and AUM as of 31 July, 2021)
Points to analyze before investing in a bluechip fund
The expense ratio, annualized returns, percentage share in the category, AUM, portfolio distributions, Standard Deviation (SD) to know the volatility of the fund's returns are some of the major points an investor should always check before investing.
The expense ratio is calculated by dividing the total value of fund assets by the total amount of fund fees. An expense ratio will measure how much of the fund's assets will be used for administrative and other operating expenses. The management fees and operating expenses, both of these will be charged to the investors of the fund. Before choosing any bluechip mutual fund or SIP, studying the expense ratio is advised, to understand the net profit of the investor, because as lower the expense ratio is, the higher your profits will be. On the other hand, a better percentage share in the category, and higher AUM will make the fund stronger, while a lower SD will only shrink the fund.
However, some funds put 'bluechip' at the end of their names; these names can be deceiving. Hence, analyzing the above-mentioned points is highly recommended for the bluechip mutual fund and SIP investors.