A lot of people wish to earn capital appreciation from equity markets but fear directly investing in the stock market. They fear that if the market collapses, they will lose all their money. However, one must only invest what they can afford to lose. While investing in market linked schemes, most people do the mistake of investing beyond their risk appetite. For those with zero risk appetite, such individuals should refrain from investing in equity oriented schemes. However, the problem with conservative investment instruments is that they offer low fixed interest rates and come with lengthy lock-in periods. Lack of flexibility and non-liquidity makes conservative schemes less attractive for today’s modern investor. If you are young individual with an aggressive investment approach who does mind taking a little risk in the anticipation of earning higher capital gains, you can consider investing in large cap funds.
What are large cap funds / Bluechip funds?
The term ‘bluechip’ is derived from the most expensive chip on the table of a poker game. In mutual funds, a Bluechip fund or a large cap scheme is an open ended equity mutual funds scheme that only invest in company stocks of financially well established companies. Of its total assets, a bluechip fund must invest a minimum of 65 percent of its total assets in the 1st to 100th ranking companies which consist of the large cap sector.
Are bluechip funds safer?
A bluechip fund invests in companies that have a reputation for being financially stable and are well established players in the market. This also means that there is far little scope for these companies to achieve feats as they have already done it after years’ worth of hard work. So, if you consider the risk returns ratio, one can expect stable if not high returns from their bluechip funds with minimum investment risk. The investment of a bluechip fund is to achieve capital appreciation over the long term by investing in large cap and select mid cap stocks.
Although equity markets are volatile in nature, your investments in bluechip schemes are less likely to get affected by the constant fluctuations. Also, if you keep a long term investment horizon and invest in bluechip funds in a systematic and disciplined manner, you will not be able succeed in creating wealth, but your investments might even be able to beat inflation.
Having said that, no investment is ever considered to entirely risk free and so is the case with bluechip funds. Investors who are new to mutual fund investing, they must first understand their risk appetite before investing in any mutual fund scheme. Investments in mutual funds do not guarantee capital appreciation and hence it is better to have a well-diversified investment portfolio.
Consider starting a SIP in bluechip funds
To make your bluechip fund investments safer and to achieve capital appreciation over the long term, you can consider starting a monthly SIP in bluechip funds. A Systematic Investment Plan, often abbreviated as referred to as SIP, is a method for investing in mutual fund schemes. Investors are free to start a monthly SIP by choosing an amount they are comfortable investing at regular intervals. All an investor has to do is complete all the pre-investment formalities and instruct their bank to allow auto debit. This way, every month you will automatically save, and the SIP amount will be debited from your savings account and electronically transferred to the bluechip fund of your choice. Investors are free to refer to SIP calculator, a free online tool which can help them determine the capital gains that they might earn at the end of their investment journey.
Bluechip funds might be a safer investment option as compared to small cap funds, but investors should diversify their investment portfolio such that they are able to minimize overall investment risk and maximize their long term returns.
