What Are Blue Chip Stocks, and Are They Good Investments?

To ensure smooth settlement of trades, the investors are requested to ensure that both the trading and demat accounts are compliant with respect to the KYC requirement. The demat account shall be unfreezed once the investor submits the deficient KYC details and the same is captured by the depository participant in the depository system. The Quality Score is based on company’s financial and management quality and long term performance. Quality scores above 55 are considered good and below 35 are considered bad . This term is also very prevalent in the stock market to classify funds. A benchmark is a standard against which the performance of a security, mutual fund or investment manager can be measured.

Simply search for the company’s ticker symbol in the broker’s stock screener. In addition, many asset managers also run mutual funds or index funds that specifically target blue-chip securities, making it easy to invest in a basket of such companies. There are also mutual funds that specifically target blue-chip companies, allowing investors to gain exposure to an entire basket of blue-chip stocks with a single investment. Most asset managers, such as Fidelity and BlackRock, offer one or more blue-chip-focused funds. Before we understand who is suited to investing in blue chip funds, let’s see what defines a bluechip company and how it adds value to the investor’s finances. This mutual fund scheme is highly liquid as large cap companies are highly followed in the market.

What are the Features of Blue-Chip Funds?

A blue chip fund is an equity-oriented mutual fund scheme that invests the majority of its portfolio in blue chip stocks, i.e., quality stocks belonging to established companies. These stocks usually belong to largecap companies, i.e., companies that enjoy a high market capitalization. The fund manager picks stocks belonging only to such companies that exhibit a high potential to yield stable returns and weather out market volatility. A Bluechip fund is a term used to indicate investments in stocks of well-established and financially sound companies. These companies have a credible track record with sound financial performance. Along with regular dividend payments and profitability over the years.

Though the future cannot be predicted down to the last detail, you can still be assured that a fund that has been consistently performing well belongs to a company that handles money wisely. The term ‘blue-chip’ in reference to stocks first came into existence in 1923 when Oliver Gingold, a Dow Jones worker, coined the phrase. Gingold noticed, while standing near a stock ticker at a brokerage firm, that several stocks traded at $200 or more per share. Blue-chip stocks are still nonetheless subject to volatility and failure, such as with the collapse of Lehman Brothers or the impact of the financial crisis on General Motors. A blue-chip stock refers to an established, stable, and well-recognized corporation. Having explained blue-chip fund meaning and features, let us analyse why they are a good investment option.

These companies typically sell high-quality products and services that are widely accepted across the country, or sometimes abroad. Because of these qualities, such companies are more resilient to economic downturns. They may continue to grow or operate profitably even in adverse market conditions – that is why their stocks are less volatile in a rough market. The downside is that because blue chips are low risk, they also tend to have low returns. Since these companies are well-established in their industries, they also have less room to grow than smaller startups. Moreover, because their stocks are in such wide demand, blue chip stocks tend to be more expensive than other companies of comparable size.

This diversification into data-driven and IT based services compliments that nature of work in our core financial services business and has been ongoing for the last fifteen years. Investing in a diverse portfolio is prudent rather than holding only Blue chip funds. High-risk or moderate-risk investors can have funds across sectors or capitalizations to diversify their portfolio with a proportion of Blue Chip funds. Blue Chip Fund is an open-ended scheme that can be redeemed or withdrawn whenever required by the investor.

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By accumulating returns gained on investments, they assist build wealth. This way the growth of large companies can help you to build wealth over a few years. The companies are likely to withstand the economic downturn, market volatility and are a good investment option.

Things to Consider Before Making a Blue-chip Investment

Hence their growth is significantly high when compared to large cap companies. During volatile markets, large caps are least affected when compared to mid or small cap companies. This is because markets have more confidence in these businesses than others as they continue to operate despite economic conditions. A scientifically curated portfolio of mutual funds designed to provide growth as per your goal requirements, while managing risk. You may notice some mutual fund schemes having Blue Chip in their name and preceded by the word ‘emerging’.

Blue-chip funds, although are the choice of every investor due to their high returns and regular payouts, these funds are best suited for people who are risk-averse or have a little appetite for risk. These are one of the most stable funds and also their prices do not fall drastically while the markets are adverse. Due to their lower risk profile, he returns are a little on the lower side as compared to mid and small cap funds. One of the biggest advantages of investing in blue-chip companies is that they are regular with payouts to their investors and provided with consistent dividends. If you are looking for regular dividends which can be used as a regular source of income, go for blue-chip mutual funds.

We have considered just the top 10 by returns and chosen Direct Plans for simplicity. An index fund, as the name suggests, is a passive fund that does not try to beat the market, but tries to earn as much as the index does. Hence the only concern for an index fund manager is to minimize tracking error. Index funds have the advantage of being lower on the cost scale, compared to active funds. Since most of these blue chips are closely tracked by the analysts and fund managers, there is a greater sense of purpose and performance in them. It logically follows that these blue chips tend to help diversify the portfolio and reduce the risk in the portfolio by introducing stability.

Blue chips may not be high return generators like the mid-caps and small caps but they are lower on the risk scale compared to mid-caps and small caps. This is because these companies usually have sufficient capital to clear their financial obligations easily. The Nifty 50 was a group of 50 stocks that were most favored by institutional investors in the 1960s and 1970s. The name “blue chip” came about from the game of poker in which the blue chips have the highest value. Blue chips owe their name to the game of poker where blue chips have the highest value.

Moreover, they may continue to operate and grow, even during adverse market conditions. Amongst our various businesses, we are a stock brokerage company which services clients across the country and assists them in their investment decisions. It is under the regulatory oversight of SEBI as well as NSE and BSE which on a routine and ongoing basis audit our performance, books of account and other particulars.

This reflects in the company’s financials like sales, profitability and dividends, among other parameters. Blue-chip companies have sufficient funds to finance their business and expansion plans. As such, they have enough cash flow and can quickly raise it if needed, through the public or through their relationships with banks that provide them with instant lines of credit or loans.

What are bluechip funds?

However, many of these large cap companies offer lower returns but are also lower on risk. A large cap fund is basically a diversifier of risk and creates a portfolio that optimizes returns for a given level of risk. Large cap funds need to create alpha by beating the Nifty by a large enough margin to justify the higher Total expense ratio in active large cap funds. Blue chip bluechip fund meaning funds of both ULIPs and mutual funds are launched with the specific purpose of giving investors the opportunity to benefit from financial growth of blue chip companies. Bluechip companies can endure economic downturns more proficiently than lesser known rivals. They can operate profitably or in the least better than the average, in the face of adverse market conditions.

These are large and midcap schemes which only have ‘Blue Chip’ as part of their name. It helps if you don’t blindly pick a scheme just because it has Blue Chip in its name. At the same time, investment objectives such as retirement planning, the future of the child, etc. can be met by investing in Blue Chip Funds. Until now, the scheme has delivered https://1investing.in/ the yields that have helped many investors earn significant revenue over time. Investors can achieve their investment objectives effectively by accumulating an enormous corpus in the future. Every investor wants to create investment to guarantee that the funds behave like the last resort at a moment when he/she is in dire need of cash.

• You may invest in mid-cap or small-cap funds to build wealth over the years.
• As a result, these companies are able to cushion themselves against potential losses, and their investors are able to diversify risk for stable returns.
• Bluechip funds should ideally be a part of the portfolio but not a complete portfolio.
• Having explained blue-chip fund meaning and features, let us analyse why they are a good investment option.
• Younger investors can bear the higher risk that comes with investing in these stocks as they have a longer investment horizon.

While redemptions made after one year attract long term capital gains tax . Just write the bank account number and sign in the application form to authorize your bank to make payment in case of allotment. Blue Chip funds are high on the costly side, and before investing in them, investors should know the value of those funds. As part of their portfolio, investors should invest in Blue Chip funds, but not as a complete portfolio. A blue chip is stock in a stock corporation (contrasted with non-stock one) with a national reputation for quality, reliability, and the ability to operate profitably in good and bad times.

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One of the most important factors why people invest is to increase their financial corpus. They offer profits on investments and help a person enhance their capital. In fact, most of the blue chip stocks are high dividend and consistent dividend paying stocks and that works in favour of the fund holding these stocks. If you stay invested in blue chip funds with a long-term perspective, your investments grow with consistent returns.

As a result, stocks of such companies can be purchased and sold easily, offering investors high levels of liquidity. Section 80 C of the Income Tax Act, 1961, treats the gains generated from blue-chip funds as income. As a result, the short-term capital gains are taxed at a flat rate of 15%.

Blue-chip stocks are seen as less volatile investments than owning shares in companies without blue-chip status because blue chips have an institutional status in the economy. The stocks are highly liquid since they are frequently traded in the market by individual and institutional investors alike. Therefore, investors who need cash on a whim can confidently create a sell order for their stock knowing that there will always be a buyer on the other end of the transaction.