Mutual funds offer various investment options. You can invest in equities, debt, and gold through mutual funds, making them a unique investment option for new as well as seasoned investors. You can examine your risk appetite and financial objectives and invest in different mutual funds to earn returns. Blue chip mutual funds are a type of mutual fund that offer stable returns since they invest in large-cap companies with a proven track record.
In this article, we’ll learn how blue-chip funds can help navigate volatile market conditions.
Understanding a blue-chip fund
A company with a large market capitalisation, proven track record, and promising growth prospects is generally termed a blue-chip company. Such companies are usually leaders in their sector, and their stocks can influence the movement of various market indices.
Blue-chip funds invest a significant proportion of money in such companies. These funds are considered one of the safest investments in the equity market.
How do blue-chip funds help navigate diverse market conditions?
There are several reasons why you should consider investing in blue-chip mutual funds. These funds invest in large-cap companies with proven records and prospects. Moreover, they significantly dominate their sector, so they tend to be stable in volatile market conditions. A few other reasons why blue-chip funds can help you navigate diverse market conditions include the following:
1. Stable returns
Blue-chip mutual funds are known for their stability even during adverse market conditions. They are never valued absurdly and provide steady momentum during most market conditions.
2. Better outlook
Since blue-chip companies are leaders in their sectors, they have enough funds for research and development (R&D) and for expanding their business. They can use their prowess to develop new products and better services in the future and retain their market share.
3. Lower chances of suffering losses
Blue-chip companies do not have hefty debts, reducing the chances of losses if the business doesn’t perform well. They also have more significant asset accumulation to encounter adverse market situations.
4. Always in demand
In case of a price fall during an unfavourable market shift, retail investors find it hard to offload their investments for unpopular stocks. However, it does not happen with blue-chip companies since they are well-established and always in demand.
5. Convenient tracking
Since blue-chip companies have an extensive presence in the market, they enjoy robust distribution systems, significant goodwill, and franchise. You can easily track their developments in the media, so you don’t have to research their performance frequently.
Whether you are a new investor or an experienced one, a blue-chip mutual fund can provide decent returns and meet your investment goals. They are more immune to market volatility and rarely provide losses in the long run. However, mutual funds are subject to market risks, so be vigilant before investing.