Updated on March 3, 2023
A mutual fund which invests in Blue chip stocks is called Blue chip fund. Unit Linked Plans of Insurance companies or other Investment Funds may also invest in stocks of such blue chip companies.
Companies with large market capitalisation, strong management and consistent profit making, creditable brand names are called ‘Blue Chip’ companies and their shares are called Blue chip stocks. These companies are well known, may have high valuations and generally pay dividends to shareholders year after year.
What are the features of Blue Chip Funds?
Some key characteristics of Blue Chip funds are:
1. They invest in companies which are market leaders in their field and amongst top 2 or 3 in their sectors.
2. The companies they invest in have a strong financial base with a consistent profitability record and strong balance sheets.
3. These funds provide stability to the portfolio and have relatively low volatility.
4. They invest in well researched and recognised, well tracked businesses which are highly liquid.
What are the benefits of Blue Chip Funds?
Blue Chip Funds form the core of portfolios of Institutions as well as retail investors. Some benefits of these funds are.:
a) Blue chip funds are suitable for investors who want to invest in equity funds of stable, large companies with stability and lower risk.
b) These funds are appropriate for long term goals like retirement planning, children’s education or marriage.
c) Blue chip funds are considered to be strong investments across market cycles either as standalone investments or even as part of a portfolio.