Understand the Investment Objective of Bluechip Funds

Equity mutual funds are further categorized based on the market capitalization they choose to strategize asset allocation. To put it in simple words, market capitalization is the value of a company that is traded on the stock market, calculated by multiplying the total number of shares by the present share price. Market capitalization can be further understood on the basis of this simple formula. Market capitalization is commonly referred to as market cap where ‘cap’ stands for capitalization.

Here’s a simple formula that defines market cap –

Market cap of a company= Current market price of one share * Total number of outstanding shares

What is large cap / bluechip funds?

As per the guidelines set forth by market regulator SEBI (Securities and Exchange Board of India) a large cap fund is “An open ended equity scheme predominantly investing in large cap stocks”. To intricate, large cap funds or bluechip funds are open ended mutual funds that predominantly invest in stocks of companies that have large market capitalization. These funds predominantly invest in stocks of those companies which are financially well established and earned a reputation for being industry biggies. Of the total assets, large cap funds invest a minimum of 80 percent in company stocks and other equity related instruments of companies having a large market cap.

What is the investment objective of a bluechip fund?

If you are someone with a moderately high risk appetite and someone who seeks stable capital appreciation through investments inmarket linked schemes, you might want to consider investing in a bluechip fund. The investment objective of a bluechip fund is to achieve long term capital appreciation by investing in a diversified portfolio mainly consisting of equity and equity related securities of large cap companies and other equity related instruments.

Bluechip funds are equity oriented schemes. They highly depend on the performance of equity markets. Equity related investments are highly volatile in nature. Over the short term, your portfolio might have to incur losses. However, equity funds like bluechip funds are known to offer far better capital gains as compared to conservative schemes when held for a longer time period. The investment objective of a bluechip fund is to offer decent returns over the long term. Hence, investors are expected to understand that if they are investing in bluechip funds, they must keep a long term investment horizon.

Start investing systematically in bluechip funds

If you wish to invest systematically in bluechip funds and want to make sure that you are able to achieve the desired corpus, then you need to consider starting a SIP in bluechip funds. A Systematic Investment Plan (SIP) is an easy and convenient way of investing in bluechip funds. Investors do not need to have a large investment amount at their disposal in order to invest in bluechip funds. They can start investing with an amount as low as Rs. 1000 per month and continue investing till their investment objective is achieved.

Investors need to complete all the pre-investment formalities and KYC documentation before starting a SIP in mutual funds. Once you decide how much you want to invest, every month on a fixed date a predetermined amount is debited from your savings account and electronically transferred to the bluechip fund. Investors can also refer to SIP calculator, a free online tool to help them determine how much they need to invest regularly in order to get closer to their desired corpus. Bluechip funds are flexible, investors can stop their investments and switch to a better performing fund if that are unhappy. They can even redeem bluechip fund units as per their income needs.

However, one must talk to their financial advisor before investing.