What is the difference between large-cap and blue-chip funds?

A mutual fund is a professionally managed company that collects money from many investors and invests it in securities such as stocks, bonds and short-term debt, equity or bond funds and money market funds.

Mutual funds are a good investment for investors looking to diversify their portfolio. Instead of betting everything on one company or sector, a mutual fund invests in different stocks to try to minimize portfolio risk.

The term is typically used in the US, Canada and India, while similar structures around the world include the SICAV in Europe and the open-ended investment firm in the UK.

What is the difference between large-cap and blue-chip funds?

You must have often come across fund names such as RST Bluechip Fund or XYZ Large-cap Fund while looking for information about mutual funds, their performance, NAVs and rankings. The fund name “Bluechip fund” and the “large-cap fund” are used interchangeably because both refer to those equity investment funds that invest in shares of publicly traded large-cap companies.

If you refer to SEBI’s product categorization circular issued in October 2017 which went into effect in June 2018, there is no mention of Blue chip funds in the Equity Fund category. Does this mean we don’t have Bluechip funds now? No, it just means that whatever the nomenclature, as long as a fund invests in the top 100 listed companies by market capitalization, it will be classified as a large-cap mutual fund.

There are many companies listed on the stock exchange on various stock exchanges in India. Large-cap refers to the top 100 publicly traded companies in India by full market capitalization (market capitalization = number of publicly traded shares * price of each share).

Bluechip shares often refer to the shares of the largest publicly traded companies in an economy. Large-cap mutual funds invest 80% of their assets in such blue-chip stocks. So some AMCs choose to label their large-cap funds as Bluechip Mutual Funds.

The next time you want to invest in a well-diversified stock fund with stable return potential, don’t get bogged down by their names. Look for the category they fall into, and if they are classified as large-cap funds, that’s where you need to make your next stage of analysis and selection before finalizing a fund.

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