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When you invest in the mutual fund market, you have a medium-to-long-term goal in mind. Because there is a diversity of schemes available, you can pick the one(s) that best meets your goals. For many investors, stable returns is a priority as opposed to, say, high returns that come with high risk. If you belong to this category, blue-chip mutual funds (MF) are the right fit for you.<\/p>\n\n\n\n
So, what is a blue-chip mutual fund and what are its advantages? These are essentially large-cap funds that promise steady returns at all times. Let\u2019s get down to the details of blue-chip MFs in this article.<\/p>\n\n\n\n
So, what is a blue-chip company? A blue-chip company is one that enjoys wide acclamation for its products and services. Its excellent performance reflects its profitability. As a result, its stocks are the safest and the least volatile to invest in.<\/p>\n\n\n\n
A blue-chip mutual fund makes investments in blue-chip stocks, i.e., in companies with excellent financial performance. These funds are ideal for investors looking for less volatility and more stability.<\/p>\n\n\n\n
Investors who purchase blue-chip funds benefit from the financial growth of blue-chip companies. For purposes of risk diversification, blue-chip funds may be invested in bonds, mid-cap stocks, and cash equivalents. Young investors can choose to invest in stocks as the long investment horizon balances out the risk. On the other hand, older investors can rake the safe route by investing in bonds or cash.<\/p>\n\n\n\n
Listed below are some of the top features of a blue-chip mutual fund \u2013<\/p>\n\n\n\n
Shares of blue-chip stock companies are high in credit-worthiness. This is because these companies usually have sufficient capital to clear their financial obligations easily.<\/p>\n\n\n\n
\u2022 Low risk<\/p>\n\n\n\n
Investing in blue-chip stocks offers investors the dual risk benefit. Firstly, the stable financial performance of these companies ensures that their stocks are not easily affected by market volatility. And secondly, since these companies naturally diversify their risk by generating revenue from different channels, investors are further cushioned against unfavourable market conditions.<\/p>\n\n\n\n
\u2022 Investment horizon<\/p>\n\n\n\n
Blue-chip mutual funds usually have an investment horizon that goes beyond 7 years. This makes these funds perfect for meeting long-term financial goals.<\/p>\n\n\n\n
\u2022 Steady growth prospect<\/p>\n\n\n\n
Blue-chip stocks grow in valuation at a slow but steady pace. This is because these companies have typically reached or are nearing their growth potential. This translates to assured returns for investors<\/p>\n\n\n\n
\u2022 Taxation<\/p>\n\n\n\n
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%. On the other hand, long-term capital gains that exceed Rs. 10 lakhs are subject to taxation at the rate of 10%.<\/p>\n\n\n\n
Blue chip companies fall into the following categories in India:<\/p>\n\n\n\n
Additional Read: <\/strong>Everything About Blue Chip Stocks<\/a><\/p>\n\n\n\nAdvantages of investing in blue-chip funds<\/strong><\/h2>\n\n\n\n