How to Evaluate The Performance of Bluechip Funds

Introduction

There are several types of Mutual Funds available for investors and at times it can get a bit overwhelming. However, understanding the different types and their purpose will ensure that you are better prepared to invest. One of the most popular mutual fund type in India are the Bluechip funds and here is all that you need to know about them.

Blue Chip Funds

Blue Chip Funds are fundamentally equity based mutual fund schemes that primarily aim at adding stocks to the portfolio of investors, that offer solid and stable returns over a longer period. The companies are majorly large cap companies, which offer financial stability. It is for this reason, that blue chip funds are also known as large cap mutual funds. The companies in sector are known for their stability and consistent returns as well as their resilience to economic downturns. 

These funds are ideal for individuals looking to grow their funds in the long term, without taking too many risks. Here are some features of blue chip funds.

1. Blue chip funds usually generate returns and dividends, thus allowing your funds to grow at a faster rate over longer duration.

2. Since your funds are invested in well established companies with a proven track record, the chances of financial burden on these companies are low.

3. Though these are still equity investments, they are relatively low risk, due to the nature of large cap companies.

4. Blue chip companies are mostly companies that very close or already reached their maximum growth potential. Thereby, offering steady growth rather than exponential growth. 

How to choose a blue chip mutual fund?

Once you have zeroed down that you want to invest in a blue chip mutual fund, the next task will be to identify the right fund to park your funds in. here are a few things that you need to keep in mind for the same.

1. It is important to understand whether the fund aligns with your long term goal or not. Since blue chip funds tend to offer steady returns over longer time frame.

2. Ensure that you look at the expense ratio of the fund, as these are the costs that asset managers charge you annually for running their funds. A lower expense ratio is preferred.

3. You can look at the 3 and 5 year CAGR returns of blue chip funds to ascertain their past performance. It must be noted, that in no way the past returns implicate future returns. However, they give you insights into how the fund might perform.

4. It can be good idea to look at the past performance of the fund manager and their track record as well.

5. Even though they carry lower risks, blue chip funds still have large exposure to risk. Make sure that the fund matches your risk appetite. 

One of the most popular blue chip funds in the country is the ICICI Prudential Bluechip Fund. And it can be a great starting place for your investments. The fund invests about 89.53% of its assets in the domestic equity market. Out of which 76.3% is in large cap companies, 2.58% in mid cap companies and 0.58% in small-cap companies. Since it is an equity fund at the core, it has an expense ratio of 1% for any switches or redemption within a year of investing. The fundamentals and structure of ICICI Prudential Bluechip Fund remain similar to other blue chip funds, with holdings being the major differentiating factor.

Conclusion

Blue chip mutual funds are ideal for investors who are looking for steady returns over a long period and do not want to take a lot of risks. The funds tend to do well compared to the indexes over a 3 to 5 year window. ICICI Prudential Bluechip Fund is one of the most popular blue chip funds and can be a solid addition to your portfolio.

Ref:

1. https://coin.zerodha.com/mf/fund/INF109K016L0/icici-prudential-bluechip-fund-direct-growth

2. https://www.bajajfinserv.in/investments/a-guide-to-what-are-blue-chip-mutual-funds

3. https://www.moneycontrol.com/mutual-funds/nav/icici-prudential-bluechip-fund-growth/MPI392#google_vignette