What is a Blue chip fund?

A Blue chip fund is a term used to indicate well-established and financially sound companies. Blue chip funds invest in stocks of those companies that have a credible track record with sound financials along with regular dividend payments and profitability over the years.

Aug 11, 2018 06:08 IST India Infoline News Service

Feeder Funds
The term “Blue chip” comes from the game of poker where the blue chip is the most expensive chip in the game. This term is also very prevalent in the stock market to classify funds.
 
A Blue chip fund is a term used to indicate well-established and financially sound companies. Blue chip funds invest in stocks of those companies that have a credible track record with sound financials along with regular dividend payments and profitability over the years.
 
Features of Blue chip funds

It provides a steady growth of the investor’s portfolio.
  • The Blue-chip funds have a significant advantage over other funds as they can tide over market volatility.
  • They boast of superior and sustainable cash flows indicative of past performances.
  • They have stable and experienced management with expert corporate governance.
  • They also give regular dividends to their investors.
 
How Blue chip funds work
Blue chip funds are known for enduring market downfalls than lesser known companies. When faced with adverse market conditions, the Blue chip can perform considerably better, which is also indicative of their growth and stability. In a word, Blue chip funds offer reliability to the investor’s portfolio.
 
The blue chip funds are usually expected to move in the same range, and the broad market consists of more blue chips. One can invest in both Blue chip funds and Blue chips ULIPs to benefit from the financial growth of these established companies.
 
Bottom line: Blue chip funds are little on the expensive side, and the investors should understand the valuation of those funds before investing in them. Investors should make blue chip funds as part of their portfolio but not as a full portfolio. It is prudent to invest in a diversified portfolio rather than hold only Blue chip funds as they tend to give steady but lesser returns.
 
An investor can hold small-cap and mid-cap funds also in their portfolio to generate wealth and if there are any ups and downs in those funds, the blue chip funds can re-balance the portfolio or stabilize the earnings of the investments.
 
Investors with high-risk or moderate risk can have funds from across sectors or capitalizations with a percentage of Blue chip funds to diversify their portfolio.
 
Some of the Blue chip funds in India:
  1. Franklin India Bluechip Fund                     
  2. Aditya Birla Sun Life Frontline Equity Fund                                         
  3. HSBC Large Cap Equity Fund                      
  4. Reliance ETF Junior BeES                             
  5. Sundaram Select Focus Fund-Regular Plan
  6. SBI Bluechip fund
 
There are many Blue chip funds in India that are known for their consistency and growth rate. Investing in Blue chip funds is a good investment plan for risk-averse investors, who are looking for a stable income and dividend from their investments.

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