Blue Chip Stocks refer to shares of companies with large market capitalization (Blue chip Companies). These companies are relatively less sensitive to market fluctuations compared to Mid Cap and Small Cap companies.
The term ‘blue chip’ comes from the game of poker where the blue gambling chips holds the highest value on the table. Similarly, the Blue Chip companies represent those companies from each industry that are well-established, have stable earnings and have the highest market valuation.
Companies with large market capitalization deliver consistent returns on investment, because of their high endurance during turbulent market swings. When it’s a bullish market, returns from equity investments in large cap companies are better than companies with low market capitalization.
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Who Should Invest in Blue Chip Stocks?
Blue Chip Stocks offer great opportunity for making high returns on investment. If an individual has a sound knowledge of financial markets and enough time to track the market, s/he should invest in blue chip shares to earn consistent returns. The suitable investment horizon for blue chip investment is 5-6 years.
The growth potential of Blue Chip companies is relatively less, as they’re already at the peak of their performance in their respective sectors. This is why investment in equities of these companies carries low-risk, together with low returns when compared to companies that have a high growth potential. If you have a high risk appetite, then you should consider investing in mid-cap or small-cap companies.
Best Blue Chip Stocks in India
According to the market capitalization, there are multiple blue chip companies whose stocks will generate good returns in the long run. Here is a list of top 10 blue chip stocks that are faring well in the stock market:
- Indian Tobacco Company (ITC) Limited
- Hindustan Unilever Limited (HUL)
- Reliance Industries
- Tata Consultancy Services (TCS)
- Oil and Natural Gas Corporation (ONGC)
- Housing Development Finance Corporation (HDFC)
- Eicher Motors
- Sun Pharmaceuticals Industries Limited
- State Bank of India (SBI)
How to invest in Blue Chip Stocks and Funds?
To invest in Blue Chip Stocks, one needs to have a demat account. Investors can either directly invest in a preferred stock, or invest via a broker. However, you need to pay a brokerage fee when you choose to invest through a broker.
If you want to invest in blue chip funds, you can do so in the two following ways:
You can invest in Blue Chip Funds online seamlessly through online platforms (such as Paisabazaar.com) or directly through the websites of the Asset Management Companies (AMCs), offering the fund.
This conventional mode of investment requires an investor to fill a form and submit it at the nearby branch of the fund house, or invest through a broker.
What are Blue Chip Mutual Funds?
Blue Chip mutual funds, also known as large cap mutual funds, pool resources from investors and invest those resources in equity or equity related instruments of large cap companies. Investors who want to earn long-term returns coupled with a moderate risk appetite should invest in Blue Chip mutual funds.
Returns generated by these funds are consistent over a long period of time owing to the ability of underlying companies to endure economic downturns.
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Top 5 Best Blue Chip Funds for 2020
There are numerous mutual funds in India that invest in blue chip companies. If an individual doesn’t have professional experience or knowledge about the working of financial markets or time to track the market swings, s/he can invest in blue chip funds to earn quality returns. These funds are categorized under Large Cap funds. Here is a list of top 5 Large Cap funds:
|3 Year Return
|Mirae Asset Large Cap Fund
|Axis Bluechip Fund
|SBI Bluechip Fund
|ICICI Prudential Bluechip Fund
|Principal Emerging Bluechip Fund
|₹ 2236.32 crore
|Kotak Bluechip Fund
|₹ 1388.25 crore