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What are Bluechip Mutual Funds? Why Invest in Them?

Are you looking for mutual funds which can provide you with stable returns? If you are a risk-averse investor looking for those funds which not get much affected by market volatility, then bluechip funds like the Axis Bluechip fund can be a great option for you. If you are wondering what is a bluechip fund, where it invests, average returns, and other details. This article will talk about everything you need to know about these funds. 

What are bluechip mutual funds?

Bluechip mutual funds are those funds that invest in companies having the largest market shares, huge brand value, and years of experience in the market, which are stable, and provide solid returns and dividends. However, you may say that these are nothing but large-cap funds, and you won’t be completely wrong. Bluechip mutual funds invest in the top large-cap companies mainly. So, large-cap companies are those that rank within the top 100 companies by market capitalisation in the country, so bluechip funds invest in the first few companies out of these hundred in most cases. As per AMFI or SEBI, there is so specific categorisation of blue chip funds, and they are considered large-cap funds only. 

These are open-ended equity funds where at least 65% of the assets are invested into equity and equity-related instruments of the bluechip companies. 

Read: Stocks? PPF? Mutual Funds? Find Your Perfect Investment Plan

Why should you invest in bluechip mutual funds?

Now, if you are wondering why you should invest in bluechip mutual funds, then here are a plethora of reasons for adding these mutual funds to your portfolio – 

  1. Highly-stable returns:
    Bluechip mutual funds invest in highly stable companies. Thus, the returns generated by these funds are also quite stable. In the equity fund segment, while returns are very volatile though high, bluechip mutual funds offer moderate returns, but you can count on these funds. Hardly, there is any incidence that these funds didn’t offer good returns.
  2. Lowest risk factor:
    Equity funds are usually highly risky, but not Bluechip funds. Since blue chip companies have such huge market capitalisation and brand value, which keep them stable even during a volatile market, the risk factor gets reduced to a huge extent. Bluechip mutual funds are one of those equity funds which are perfect for risk-averse investors.
  3. Long-term investments:
    Then comes the long-term investment benefit. These Bluechip mutual funds are like the tortoise in the rabbit and tortoise race, slow but steady, which always wins the race. If you are investing with a long-term goal, these mutual funds can be apt for your portfolio. With an average tenure of 7 years in these funds, you can expect to generate great returns.
  4. High liquidity:
    If a fund invests in stocks of such companies which are having highest market capitalisation, then liquidity is inevitable, isn’t it? So, bluechip mutual funds are highly liquid.
  5. Helps in portfolio diversification:
    Bluechip mutual funds invest in large-cap companies across sectors. For instance, if you see this Axis Bluechip fund from Axis Mutual Fund, it invests in banking and finance sector stocks like ICICI Bank Ltd. HDFC Bank Ltd., Bajaj Finance Ltd., and others. Then it also invests in Infosys Ltd., which is a computer or IT sector stock. Then it has investments in Reliance Industries Ltd., which is in the refinery business, L&T in construction and engineering, and others. So, a blue chip mutual fund can help you diversify your investment portfolio without effort. A well-diversified portfolio means reduced risk and optimised profits.

Taxation of bluechip mutual funds

As per current tax slabs and rates applicable, if you redeem the fund within one year of purchase, then you will be charged 15% short-term capital gain taxes and cess and surcharge on top of that. However, as mentioned above, if you are investing in bluechip funds, you should stay invested for at least seven years, and when you redeem the investment after a year of investment, given that in any year, you will have to pay long-term capital gain taxes which is at present levied at 10% on profits above Rs. 1 lakh. 

Is the AXIS Bluechip Fund a good investment?

The blue-chip mutual fund offered by Axis Mutual fund, which is called Axis Bluechip fund, has been offered an annualised return of 15.55% since inception, while the category average is 13.90%. In the past three years, the fund has been performing well and offering a 16.41% return per annum. It presently has 87.49% of its investments in equity and equity-related instruments, out of which it has 75.04% of large-cap stocks in the fund. If you are looking for a long-term investment, then this fund can be a good investment option for you. The expense ratio of this fund is 0.52% currently which is subject to change as per the mutual fund house. 

Read: How To Find The Best Low Duration Fund

Wrapping up

Bluechip funds are an all-time favourite of most investors as these funds offer higher returns than many other equity funds, but the risk level is low, which is a rare combination. These funds’ stable returns make them so popular amongst investors. 

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