The Indian investor may have a plethora of schemes to choose from, but one needs to first address their financial goals before making an investment decision. Financial planning helps individuals determine their life’s short term and long term financial goals. Most investors consider investing their hard earned money in financial schemes mostly because they want to improve their existing financial wealth. Wealth creation is possible if you continue investing in a systematic and disciplined manner for the long run. If you are someone who is young and aggressive and keen on investing in market linked schemes, you can consider investing in equity mutual funds.
Equity mutual funds are open ended schemes which aim at generating capital appreciation over the long term by investing across company stocks and other equity related instruments. These are a pool of professionally managed funds where the fund manager builds a portfolio of diversified stocks and securities through an applied investment strategy to help the scheme outperform its underlying benchmark.
Equity schemes can be further classified based on the market capitalization they tap into for choosing stocks. Large cap funds or bluechip funds are equity oriented schemes which aim at generating capital appreciation over the long term by investing in stocks and equity related instruments of large cap companies. As per SEBI guidelines, a bluechip fund must invest a minimum of 65 percent of its total assets in large cap company stocks.
Why should you consider investing in bluechip funds?
Bluechip funds are considered to be less volatile as they invest in stocks of companies that are well established. These companies have earned a reputation for being established players in the market and are financially stable. A bluechip fund manager builds a portfolio of stocks by investing in top 100 companies in terms of market capitalization. Investing in stable companies may help investors overcome their desire of becoming wealthy and improving their existing financial condition.
These funds are considered to be less volatile than small cap funds where the liquidity level is less, and investment risk is very high. Equity schemes like small cap funds invest in companies that are ranked beyond 250 in terms of market capitalization. Such companies are usually start ups who may or may not succeed with their business ideas in the long run. A bluechip funds on the other hand only invest in stocks of established companies thus having the ability to generate stable income.
Target your life’s long term financial goals
Bluechip funds are equity oriented schemes which require investors to have a long term investment horizon. That’s because these schemes have managed to outperform other investment schemes in the past when remained invested for a minimum period of 10 years or above. By investing in bluechip funds investors might be able to achieve their life’s long term financial goals like buying a weekend home or building a retirement corpus or financially securing your future or building a corpus for their higher education.
Consider starting a SIP in bluechip funds
A Systematic Investment Plan or SIP is an easy and convenient way of investing in bluechip funds. If you do not have surplus capital to make a lump sum investment, you can start a monthly SIP and invest fixed amounts at regular intervals till your investment objective is achieved. There are some fund houses that have SIPs starting with a minimum investment amount of Rs. 500 per month. Long term investing in bluechip funds via SIP may even allow investors to grow their wealth through rupee cost averaging and power of compounding.
Investors are expected to consult their financial advisor before investing.
