What are Blue Chip Stocks

 

What are Blue Chip Stocks

A blue-chip stock is the stock of the companies that are well establishes within their sectors with an excellent reputation and have a higher market capitalization. These companies have been operating in the market for a long time. A company which is considered as blue chip will tend to be at or near the very top of its sector.

A Blue-chip stock often pay a steady dividend to their investors. A blue-chip company is immediately identifiable, financially solid, and has a wide range of distribution network. These businesses usually provide high-quality goods and services with good quality across the nation. A blue-chip is a long-term investment with a consistent growth.

Examples of Blue-chip Stocks
There is no any predefined formal list of blue-chip stocks but, typically, the components represent in INDEX will be considered as blue-chip indices-this include global indices such as the Dow Jones, the DAX, CAC 40 and Euro Stoxx 50.
Blue-chip stocks are subject to change but we have mention here some of the common examples.
• Apple
• Coca-Cola
• Disney
• Microsoft
• Nike
• Johnson & Johnson

How to Choose the Best Blue-chip stocks?

A set of criteria determines a company is a blue-chip or not. Here we have mentioned some of the important point which helps to choose a blue-chip stock.
1. Low Risk- Blue-chip investments are recommended for those investors who want to achieve long term objectives of at least 5-7 years with a conservative risk profile. However, investing in these firms is an excellent way for all investors to build a diversify portfolio over time while avoiding risk and fluctuation.

2. Financially Resilient- These businesses are economically resilient, having little to no debt. The majority of the top blue-chip stocks to purchase area market leaders in their respective fields.

3. Portfolio Diversification- Blue-Chip stocks are those which has well diversified corporations with diverse revenue streams. As a result, the losses incurred by one channel are offset by revenues generated by another channel.

4. Consistent Returns- Blue-Chip companies are vast and widely known for their steady performance. The finest blue-chip investment has a track record of consistently returning to shareholders in the form of significant dividend distributions at regular periods.

Advantages of Blue-Chip Investments

Here we have mentioned some of the advantage for investing in blue chip stocks.

• Dividend- Blue-chip stocks are often pay our long term fi, which allow you to earn consistent and stable income. Even if you are not investing for payment, a dividend reinvestment plan will enable you to automatically transfer your dividends into new shares of your blue-chip company.
• Stability- As Blue-Chip stocks are the well-established and has a large capital hence these provide consistent returns.
• Financial Goals- Blue-chip investment will help you to achieve your long-term financial goal by generating money with a consistent return.
• Liquidity- There is enough number of buyers and sellers in the blue-chip stocks. When investors want cash, it becomes simpler to sell their securities due to enough liquidity.
• Timely Payment- Blue-chip stocks pay dividends regularly. That is the main reason why blue-chip firms or investors are considered to be the finest investment.

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Also Read: Alice Blue Algo Trading - Details and Benefits

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