Do you know when you invest in mutual funds, your money is again invested in small and mid-cap stocks? This is a very common practice. But there are also some blue-chip schemes where the fund is invested in large-cap companies, in short, it is reinvested in established businesses that have a proven financial history. These companies are reputed, and well-known, such companies can be the top-listed organizations w.r.t market capitalization.
Are blue-chip funds the right things for you?
An individual’s financial goals play an important role in their choice of investing in financial alternatives. Financial goals can be divided into short-term, mid-term, and long-term basis. You might choose different types of investment to meet them. These avenues include equity, mutual funds, insurance, fixed deposits, and much more. For you to tap the most out of these financial alternatives each of the investment options must be weighed rightly to know their pros and cons to make the best choice.
Be it the risk that entails with the investment or the returns you are going to get in a particular time, before investment each aspect of the financial avenue is necessary to evaluate before coming to any conclusion. If you prefer to invest in something that gives you stable returns, you might want to go for fixed income securities, meanwhile, if you are wanting to achieve higher returns with balanced risk then mutual funds might be the right option for you. One such scheme is that of Blue-Chip Funds.
Characteristics of Blue-chip Companies
- Companies with a long performance record of profitability and payouts of regular dividends to the investors.
- Experienced and professional managers with decades of experience that assure informed decision making.
- Industrial experience of several years and often have a market leader or among the top players within the industry.
Reasons to invest in Blue-chip Companies
Every Blue-chip mutual fund investment company uses a different investment guideline and may invest in mid-cap companies. These types of funds are good if you are a moderate risk investor and want to build a corpus over a long period to meet financial goals.
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.
Are the Blue-chip Funds the right things for you?
There are several benefits of blue-chip investments. Blue-chip funds are a good investment option if you are looking for diversification in your investment portfolio and want to balance risk with higher corpus development.
Diversification of Risks
Diversification is the key to mitigating the risk, this way if a particular investment does not perform well, diversification of funds ensure that overall return is not affected due to the earning of the other financial avenue.
If you choose the right blue-chip company you might be offered a regular, steady dividend. This assures that your fund will be invested in blue-chip companies that have a proven performance record and give you a higher return. The regular dividends can serve as the additional income source that might help you to reach your financial goals much easier.
Blue Chip organizations also are managed by skilled and experienced professionals. This assures the company will perform consistently and will be untouched of the market volatility or economic run down. Moreover, the companies have lower leverage that is a debit to-equity ratio, this allows you to earn stable returns through your investment over the longer run.