Why Blue-chip funds are the best choice for long term investment.

Why Blue-chip funds are the best choice for long term investment. 

If you are not aware of the term Blue-chip, then let me explain you the why some stocks are categorized as Blue-chips and what are Blue-chip mutual funds. 

Basically, the term "Blue-chips" is taken from the game poker. In the poker game different colour of the chips identify their value. The Blue-chips holds a higher value that is $10 for one chip. 

In the stock market, the Blue-chip stocks mean large-cap stocks. Stocks which has higher market capitalization. In mutual funds, if the fund portfolio holds Blue-chip stocks only, the fund will be categorized as Blue-chip or Large-cap funds. 

Now, why these funds are so popular for long term investment? 

There are many factors which makes a stock large cap. 

1. Higher market capitalization 

2. How long the stock is listed in the exchange 

3. What is the price of the stock 

4. How dividend that stock is paying and how regular 

When you choose a Blue-chip stock, you are investing in a company which has a well-settled business and is already performing good in terms of returns. That means in long term, these stocks are expected to give you good returns. At least better in comparison to mid-cap or small cap. Not necessarily, all large-cap stocks may give you good returns in long term. But there are some important factors which make it the best choice for the long term. 

* Well settled business, which makes it less risky for the long term. 

* Less volatile 

* Chances to recover easily in the bearish market 

* Strong brand names, which holds the public trust 

* First choice for corporate and mutual funds 

* Strong financial backup 

Large-cap mutual funds are also the best choice is equity mutual funds, when it comes to long term investment. 

Your money is comparatively safe in Blue-chip mutual funds than mid-cap or small-cap funds in long term. 

Consult your financial adviser today to get more details.

Stay healthy and keep investing.

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