Blue-chips and Large-caps are the equivalent of Gold in the Stock market

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Over the past year, the stock market has taken investors for a roller-coaster ride. After getting off to a volatile but relatively range-bound start in the first quarter of calendar 2019, it climbed steeply till end April before plummeting in mid-May, only to recover to a peak by early June. Thereafter, it plunged again in July-August, leaving investors and all stakeholders in despair, until the Finance Minister intervened with incentive packages to lift the market mood. Well, post that, it dipped again, then rose again, then did a few more summersaults and that’s how it keeps going…

That’s probably why some say that the stock market is no place for the faint hearted.

We beg to differ on two counts. One – being “cautious” does not make an investor “faint hearted”. And two, there is plenty of scope for cautious investors in the stock market.

Despite this seemingly volatile appearance of the overall market, there’s something for every investor. Your choice of stock should be based on how cautious or aggressive your investment style is. And, it would also depend on how long your investment time frame is.

If you are a relatively cautious investor, who would prefer to have your hard-earned money stashed away in investment over which you will not lose sleep, there’s something for you too.

Hands-on investors could consider blue chip stocks and those that prefer the mutual fund route could invest in blue chips through large cap funds, which must invest 80% of their corpus in large-caps, i.e. the top 100 stocks of the Nifty.

A quick analysis of this segment reveals that if you had invested in a large cap fund (with an AUM of more than Rs 500 crore) around Diwali last year (2018) and held on to investment till this Diwali, irrespective of whether you invested a lump sum or through a SIP, you would not have lost money. Despite the crazy, hair-raising, roller coaster ride we described earlier, at best you could have made 20-25% returns.

Now let’s see how you would have fared if you had a slightly longer time horizon. Suppose you had invested in a large cap fund three Diwalis ago (2016). Once again, you would have experienced no loss even if you had invested in the worst-performing large cap, either in the form of a lump sum or through SIPs.

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Just like gold is a physical asset that stores value while all else is in chaos, blue chip stocks (and therefore large cap funds) have been standing strong through all kinds of weather and delivered positive results.

To know more about mutual fund investment opportunities, write into mfresearch@ventura1.com

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Disclaimer:

We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.

 

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