Bluechip funds are the all-time favourites of most investors as they offer stable returns even during tough market situations. They invest in well-known companies which have sound financial standing and huge market capitalisation. However, is this enough reason to invest in bluechip funds, or there are more to it, let’s find out.
SEBI or AMFI haven’t given any specific definition for Bluechip mutual funds, so the word bluechip mutual fund is usually given to the funds investing mostly into top large-cap companies. For instance, the Axis Bluechip fund is one of them which has mainly large-cap stocks in it.
The reason behind this is that the term bluechip refers to those businesses or companies with huge market capitalisation, exceptional fundamentals, and are financially sound, with a long history, goodwill, and massive brand value. So, all these features are in the large-cap stocks, if not in all, but the top large-cap companies can be referred to as the blue-chip companies.
These are equity funds, meaning 65% of the fund’s asset is invested in equity and equity-related investment instruments. They are also open-ended funds with SIP options and lump-sum investment options as well.
The reasons for which these bluechip funds are so popular are –
● Firstly, the brand value of these companies attracts customers even in sluggish markets. Even if they do not come up with new products and services now and then, loyal customers usually opt for them as they know the worth of their products and services.
This helps the companies have a stable business round the year, which in turn keeps their share prices stable, and thus the funds investing in these companies also offer stable returns.
● The second factor which influences people to buy these funds is the minimum risk involved in these funds. While mid-cap and small-cap funds offer higher returns than blue-chip funds, the returns here are more stable, even during economic turmoil and wild market conditions.
● Bluechip funds help reduce the portfolio's overall risk if combined with other funds for higher returns as it diversifies your portfolio to quite an extent.
● These funds invest in companies that have had a market presence for years. Axis Bluechip fund offered by Axis Mutual Fund invests in stocks of TCS, which are there in the market for the last 50 years and more.
● Another factor making these funds worth investing in is the liquidity quotient. The securities in these funds are traded in high volume, which keeps the liquidity of these funds higher as well.
Bluechip funds like the one offered by Axis Mutual Fund are suitable for those who want an average return and moderate risk. These funds offer an average yearly return of around 12%-14%, which is comparatively lower compared to mid-cap or small-cap funds, but the returns are consistent, unlike the small or mid-cap funds.
Axis Bluechip Fund is a large-cap equity fund that has been offering around 12.545 returns on average every year (based on its historical returns). The fund has more than 87% of equity and equity-related instruments, out of which 75% (approximately) is invested in large-cap companies.
There are at present 38 stocks in the fund, out of which the top three are ICICI Bank Ltd., Bajaj Finance Ltd., and Avenue Supermarkets Ltd.
The 5-year return of this fund is around 14.01%, while the category average for 5-year is 11.51%. Even the 10-year returns are higher in the case of this fund than the category average, while the 3-year returns were a little lower than the category average.
This blue-chip fund of Axis Mutual Fund has an expense ratio of 1.69% for the regular scheme, while for the direct scheme the expense ratio is 0.52% at present.
If you compare the expense ratio in the category, then you will see this fund offers a comparatively lower expense ratio as the category average of the expense ratio is 2.22%.
This can be a big plus for the investors as the expense ratio is nothing but the cost you pay for availing services from the fund house and this is adjusted against your profits. So, the lower the expense ratio, the higher the profit.
Bluechip funds are thus great for reducing the overall risk of your portfolio, earning consistent returns, and way to invest in large-cap stocks. These funds are suitable for risk-averse investors looking for stability in returns, and Axis Bluechip Fund has most of these benefits.