Blue-chip funds are mutual fund schemes which invest money in blue-chip companies which have a large market cap, consistent revenue and profits, stable business, reputed and trusted name.

Blue-chip companies are industry leaders and have seen many business cycles and market cycles. Some of the blue-chip companies are Reliance Industries (RIL), HDFC Bank, Airtel, Tata Consultancy Service (TCS), ITC, etc. Investors can invest in blue-chip funds through systematic investment plan (SIP) or lumpsum amount.

Blue-chip Funds vs Mid-cap and Small-cap Funds

Blue-chip funds are safe compared to mid-cap and small-cap funds as they generally invest the funds in top 100 companies by market cap listed in NSE and BSE. Blue-chip companies are financially sound and the share price of these companies neither rise drastically during a bullish market nor plunge during a bearish market. That is because of their strong balance sheets, diversified revenue streams, and strong corporate governance practices.

The shares of these blue-chip companies give you steady capital appreciation and most of these companies pay dividends to their shareholders. Blue-chip funds are really good investment avenue for conservative investors as they are secure, offer steady growth and ideal for long-term investments.

Similarities Between Blue-chip Funds And Large-cap Funds

While the term “blue-chip funds” is used by many investors, it is important to note that the Securities and Exchange Board of India (SEBI) had officially categorized those schemes as large-cap mutual funds. According to the guidelines issued by the market regulator Securities and Exchange Board of India (SEBI) in 2017, large-cap funds must invest at least 80% of their assets in the top 100 companies by market capitalization.

These guidelines by SEBI is to ensure consistency and transparency across fund offerings by various asset management companies (AMCs) which will making it easier for investors to understand where their money is being invested.

Are Blue-chip Funds Risk-free?

Though blue-chip funds invest in safe and large-cap companies, it is important to note that safe does not mean it is completely risk-free. Even blue-chip companies can face headwinds from global economic slowdowns as well as changes in regulations that are specific to various sectors. For example, digital disruption in banking and telecom or AI disruption in the software sector.

Further, even though these blue-chip funds are less volatile, they are still subject to market risks but have the wherewithal to recover from a downturn and perform consistently, making them suitable for investors with a longer horizon. This makes it well-suited for goal-based investing like saving for retirement, buying a house, kid’s education, etc.

Tax Implications Of Investing In Blue-chip Funds

If you invest in blue-chip funds, there are not taxes applicable. However, when you redeem your units of a blu-chip funds, you have to pay capital gain taxes based on the holding period. As these funds are equity-oriented schemes, they qualify for long-term capital gains (LTCG) tax benefits. If they are held for more than 12 months, gains up to ₹1.25 lakh per year are tax-free, and any excess is taxed at 12.5%. If they are redeemed within one year from the date of investments, they are taxed at 20%.

Conclusion

Investing in blue-chip funds is nothing but investing in large-cap companies and it should be a part of one’s investment portfolio. This would provide stability and diversification for investors.

Investors should focus on consistent performance over 3–5 year periods rather than short-term gains. Investors can compare the performance of these funds against indices like the Nifty 50 Total Return Index or S&P BSE 100, to know the performance of the funds.

Frequently Asked Questions

1. What are blue-chip funds?

Blue-chip funds are mutual fund schemes that invest in large market-cap companies that are financially strong with consistent revenues and net profit.

2. How are blue-chip funds different from mid-cap and small-cap funds?

Blue-chip funds normally invest in the top 100 large-cap companies listed on the exchanges like NSE and BSE, making them relatively safer and less volatile than mid-cap and small-cap funds.

3. Are blue-chip funds risk-free?

No, blue-chip funds are not risk-free and they still face market risk, sector-specific challenges and risk arising from unpredictable rules and regulations.

4. Who can invest in blue-chip funds?

Blue-chip funds are ideal for conservative investors and beginners. Investors seeking stable returns over a long period of time can also invest in blue-chip funds.

5. How to invest in blue-chip funds?

You can invest in blue-chip funds through Aetram Trades which is India’s one of leading and trusted stock broking companies. All you have to do is contact 044-48680008 or 044-49477777. You can also send a mail to [email protected]. Our customer care executives will help you choose the right blue-chip fund based on your financial objectives and goals.