Whenever we make any investment, the first question that comes to our mind is, “Is the investment safe?” Even while investing in blue chip Funds, the question remains that “Are blue chip investments safe?” Safety is actually an objective term, which has various connotations. However, broadly speaking, safety refers to the absence of any capital loss or less exposure to risk elements. Even if there is no growth in value, investors would definitely want the invested capital to remain intact.

It is true that blue chip investments are less volatile than their contemporaries such as mid-cap or small-cap funds because they have been in this business for long. However, even the blue chip mutual funds carry risks just like any other equity fund. These risks may impact the performance of the fund in the immediate period, but if you keep your investment horizon longer say about five-seven years, the negative returns will get smoothened out. Hence, blue chip funds are best suited for investors who are slightly conservative and have the patience to hold on to the investment over an extended period.

Blue chip funds are a good option for risk-averse investors. The secret of reaping the benefits of these is to stay invested for a long- period. The long-term financial objectives such as retirement planning or education and wedding of children require disciplined investment in good quality assets and blue chip funds are the best way to achieve this.

What are the factors that make blue chip funds a safe option?

Blue chip stocks are considered a safe option because of three important factors.

Stability

The blue chip stocks are usually the market leaders in their respective sectors, as they have been in the business for years. This also implies that they have witnessed a consistent revenue generation, which is why they have a good control over the market. This means they are stable in their performance.

Dividends

Blue Chip stocks pay dividend handsomely as compared to the other stocks. This shows they earn consistent profits and reward the shareholders as well. Dividends help the investors to realize more returns on their investment.

 Strong fundamentals

As mentioned previously, blue chip funds invest in stocks of large-cap companies, which have credibility and a sound reputation in the market. They have been conducting business operations since generations and have emerged as experts in their field. Therefore, these companies have very strong fundamentals, which include revenue, profitability, return on investment, operating profits, and cash balance, among others.

The benefits offered by the blue chip funds, in the long run, outweigh the risks associated with it. However, nobody can guarantee the returns. There are definitely certain market-related risks associated with the blue chip investments, but the same can be controlled by the expertise and farsightedness of the fund manager.

An important point to note here is that investment in Blue Chip funds is considered relatively safe. These funds do not carry high risk, move in tandem with the benchmark index, and behave in a more or less predictable manner.

As an investor, you must keep a track on your portfolio and check its performance periodically. If you keep yourself updated with the latest developments in the market and review your portfolio regularly, you can see how well it is performing. You can also compare the performance with its peers and the benchmark index.

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