What are blue-chip stocks?
The finance and investments space is full of jargon and sometimes shortcuts, these can be good ways to make use of market-tested standards and metrics. One of them is the chip system. A chip is a terminology used to describe the stock of a certain company. Of all the chip types, the blue-chip stock represents the most reliable and stable stocks. Other colors are used for several other descriptions. For example, a red chip refers to a Chinese company listed in Hong Kong, a Purple Chip is a mixture of red and blue and a Green Chip stock refers to a corporation involved in environmental sustainability. Other non-color chips used to describe stocks include P and S Chips, which describe various types of companies listed in tax haven countries and operating in China. The term Blue Chip originates during the early 20th century when an employee of Dow Jones used poker chips to describe some very high-performing stocks. It has stuck ever since.
Features of Blue Chip Stocks?
Aside from being very popular, Blue Chip stocks are usually chips that are top-performing in their market; they have a high reputation to be very reliable and have little market volatility. They typically belong to companies with very high market capitalization and make up a significant part of most global stock market indexes like the NASDAQ 100 and the S&P 500. They are not necessarily high priced but they are of very high quality. Some examples of blue-chip stocks are IBM Corp, Coca-Cola, and Boeing.
Investing in Blue-chip Companies
Investing in a Blue Chip stock would mean more stable earnings that appreciate over time, which usually balances any slight volatility or depreciation in prices. They are the most trusted stocks that have been proven to be stable even during economic meltdowns or slowdowns. For long-term stable investments, blue-chip stocks are usually the go-to stock.
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The Gains of Investing in Blue-Chip Stocks
Since they are dividend-paying stocks, they perform better and are less affected by economic downturns. Also, blue-chip stocks are well run and have stringent corporate governance requirements. This means that they can employ very ingenious plans to recover after a financial crisis, including outmaneuvering their competition and keeping your investments secure. Blue-chip stocks offer modest returns. Although, there are many other investments like stocks of corporations in growing industries that offer much more returns.
However, blue-chip stocks offer much more sustained income to protect your investment. This is useful advice for those who have a lot to invest in at the get-go and for those with very low-risk appetites. If you still want very high returns, wise investments would mean that you include a good number of blue-chip stocks in your diversification portfolio.
Before you invest in blue-chip stocks, do your research and understand how to analyze companies here and here. Blue-chip stocks do not mean automatic returns. Look out for their financial reports and see for yourself how they have been performing historically as well as over the current period — the past week and a few months.
InvestSika provides you with insights on each blue-chip company, things about them, how they are performing over time and even news related to them out there. Mkaing your research process really easy.
Decide which of the blue-chip stocks to invest in — not all are suitable for everyone. You can buy blue-chip stocks individually or together. Blue Chip stocks have some of the most stable, most dependable streams of return on investments. Wise investors always look to stocks that are more dependable and these stocks are the blue-chip stocks.
Conclusion
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