The Role of Blue-Chip Funds in Retirement Planning

Investing in mutual funds is one of the most proven ways of building wealth over time. However, with more than 2000 mutual fund schemes, it can be a bit overwhelming to choose the right fund. Understanding the different types of mutual funds and the perks that they bring to the table can be a very sensible approach. Investors looking for long-term wealth-growing opportunities should consider parking their funds in Blue-Chip mutual funds.

What is a Blue-Chip Fund?

Blue-chip funds are equity mutual funds where the fund manager primarily invests in large-cap stocks. Large-cap stocks are companies that are well established and have time and again proven to be successful and profitable. Since these companies are referred to as blue-chip companies, the fund is known as a blue-chip fund. 

A blue-chip mutual fund is regarded as a stable and relatively safe investment. And over a longer time horizon, the fund offers steady returns. The companies are fundamentally strong and financially stable, their stock prices do not usually fluctuate massively. It is important to note that SEBI does not have an official category for Blue-Chip and large-cap funds are used interchangeably.

Role of Blue-Chip Funds in Retirement

Here are some of the perks of investing in a Blue Chip mutual fund and why it should be a part of your retirement portfolio.

• Diversification

If your portfolio does not have any large-cap funds, a blue-chip mutual fund can be an ideal addition. Having some of the best-performing stable companies can add a lot of stability to your fund. And these companies can be a boon, particularly during troughs, which is desirable for retirement funds.

• Steady growth

While the funds might not be able to match high-growth stocks, they do offer steady returns when held for longer durations. Investment in blue chip funds such as SBI Bluechip fund will allow your fund to grow at better compounding rates.

• Dividends

Since your money is invested in blue chip companies, the chances of receiving steady dividends are quite high. The influx of dividends to the fund further boosts the growth of your portfolio, which can be essential from a retirement perspective.

• Strong appreciation

If you are investing with retirement as the primary goal, you will benefit from capital appreciation of blue chip stocks. When held for longer durations, the fund can offer good returns, even after adjusting for inflation.

Best Blue Chip Funds for Retirement

Investors looking for avenues for retirement can explore any of the following mutual funds.

When you consider the above, SBI Bluechip fund has performed well over 5 years with one of the best performances in large-cap funds and the best in blue-chip funds. 

Here are the top blue-chip companies in India right now:

1. HDFC Bank Ltd.
2. ICICI Bank Ltd.
3. ITC Ltd.
4. Infosys Ltd.
5. Reliance Industries Ltd.
6. Tata Consultation Services Ltd.
7. Hindustan Unilever Ltd.
8. Titan Company Ltd.
9. Axis Bank Ltd.
10. Asian Paints Ltd.
11. Larsen & Toubro Ltd.
12. HCL Technologies Ltd.

Retirement planning is as important as any other short or mid-term plans that individuals have. An adequate corpus amount will ensure that your life post-hanging your boots is as comfortable as it was while you were working. Investing in the right tool is one of the easiest ways to do so. Blue Chip Funds are ideal for your retirement planning since the funds usually have a 5-to-7-year horizon where they outperform a lot of their peers. Long-term steady growth is usually attributed to companies that are well-established and are less likely to throw surprises. 

Conclusion

Investing in Blue Chip funds can be a great way to boost your retirement corpus. The fund performs well when held for a longer duration and its steady composition means that even market lows do not impact your fund value heavily. Unlike a lot of other funds, the risk associated with them is also relatively low, making them an ideal choice for retirement.