Mutual funds are classified according to their unique characteristics, such as investment strategy, risk profile, investment portfolio, etc. For those who do not know, mutual funds are a pool of funds collected by AMCs or fund houses from investors sharing a common investment objective, for example, wealth creation. This pool of funds raised is invested across the Indian economy in various spectrums and sectors across assets such as equity, government securities, debt, corporate bonds, etc. Mutual fund investors receive shares in the form of units depending on the invested fund’s existing NAV or net asset value. Depending on the performance of the fund in the market, its NAV may either go up or come down (in case of market losses).
If you, too, wish to invest in these modern investment tools, it is better that you first identify the primary reason behind your investment. Once you set a realistic financial goal, the next step is to establish an investment horizon to potentially meet that goal and sync it with your risk appetite and ability to bear losses in volatile market conditions.
Investors seeking capital appreciation through long term investment can consider investing in bluechip funds. Bluechip funds are those mutual funds that invest a larger chunk of assets in stocks of financially successful companies. These companies have gained a reputation in the market for their successful annual turnovers year after year, and hence investing in stocks, so such companies are considered to be a lot safer. It is because of this investing in bluechip funds are considered to be a lot less risky.
Here are five reasons why you should consider investing in bluechip funds:
Bluechip funds offer diversification: Bluechip funds are unique in their own way. There are factors that distinguish them from other mutual funds, and one of those things is that they diversify an investor’s financial portfolio. Diversification also means that bluechip funds have the tendency to reduce risk and give an investor’s portfolio the stability it deserves. This is a great point for risk averse investors to consider investing in bluechip funds.
Bluechip funds tend to give consistent returns: Yes, bluechip fund invest in financially stable companies, which means that one cannot expect these funds to provide eye turning profits. However, bluechip funds excel is in providing its investors with consistent returns year after year. Remember that consistent returns are any time better than funds giving higher profits for a limited period.
Bluechip funds are ideal for long term investment: Of the total assets, bluechip funds predominantly invest in equity and equity related instruments. Historically, equity oriented schemes have benefited investors who have remained invested in the long run. So if you are someone who is investing to meet long term goals, you may consider investing in bluechip funds.
You can invest in bluechip funds through SIP or lump sum: Bluechip funds offer investors with two payment options, either through lump sum or SIP. If you have a surplus amount parked waiting to be invested for a better cause, you can use this money to make a lump sum payment towards your bluechip funds. When you invest in a lump sum at the beginning of the investment cycle, you stand a chance of buying a considerable amount of units at the fund’s current NAV or net asset value. As the fund makes positive progress and the price of the NAV goes high, you might profit from it.
SIP or Systematic Investment Plan, on the other hand, is a systematic approach to making regular payments to your mutual fund. In SIP, all an investor needs to do is instruct their bank, and every month on a predetermined date, a fixed amount is debited from their account and transferred to the bluechip fund. This entire process is electronic, and hence, investors can continue investing in bluechip funds in a relaxed and hassle-free manner. Another great thing about SIP is that you can start investing with an amount as low as Rs. 500 per month. This systematic payment approach not only holds the potential to inculcate the habit of saving regularly but also help SIP investors to benefit from the power of compounding.
Bluechip funds are available in growth and dividend option: Another great thing about bluechip funds is that they are available for investors in two options – growth and dividend. When an investor opts for a growth option, it is beneficial for the fund’s NAV. How? We’ll help you understand. When an investor chooses growth option, and if the bluechip fund manages to score profits, the profits made by the fund are reinvested in it. This process over a period of a long time tends to increase the NAV or net asset value of the fund. The dividend option, on the other hand, is an option where investors receive payouts from the fund’s profits. The only drawback here is that investors will only receive dividends if the scheme makes profits. Also, the intervals at which investors will receive these dividends are unknown and solely at the discretion of the fund manager.
So now that you are aware of bluechip funds plan on investing? If you are someone who has a long investment horizon and doesn’t mind taking some risk with the hope of seeking some decent capital appreciation, you can consider diversifying your mutual fund portfolio with bluechip funds.