As an investor, you’ve probably heard of Blue Chip stocks and may even have them in your portfolio.
In this article, we’ll dive deep into what Blue Chip stocks are, why they’re popular among investors, and the characteristics that make them stand out.
Whether you’re a seasoned investor or just starting, understanding Blue Chip stocks can help you make informed decisions and improve your investment strategy.
So, let’s get started!
Contents
- Introduction
- Are Blue Chip Stocks Safer Than Other Stocks?
- Why Is It Called A ‘Blue Chip’ Stock?
- How to Buy ‘Blue Chip’ Stocks
- Can You Lose Money On ‘Blue Chip’ Stocks?
- Conclusion
Introduction
When browsing through the collection of blue chip stocks, which ones are right for you, and what distinguishes blue chip stocks from other stocks?
We will provide answers to these important questions and give examples to make it easier.
It is crucial to carefully consider your options when investing in blue chip stocks.
Major companies like Amazon, Facebook, Coca-Cola, and Walmart are excellent examples of blue chip stocks due to their excellent reputation over the course of time.
Are Blue Chip Stocks Safer Than Other Stocks?
Although there is no single reason that a blue chip stock would be safer than any other stock, blue chip stocks tend to perform better due to their excellent reputation and longevity, even during times of economic instability.
Most experienced investors usually allocate a specific percentage of theirportfolio towards blue chip stocks, depending on their risk tolerance.
Even for newer investors , this might not be a bad idea.
Most blue chip stocks are known for paying out a reliable dividend over long periods.
Additionally, the majority of blue chip stocks are listed within any of the major stock market indexes, such as the S&P 500 or Dow Jones Industrial Average.
Regarding market capitalization, blue chip stocks are considered to have a market cap that exceeds $20 billion.
Many blue chip stocks have market caps significantly higher than this arbitrary benchmark set by investors.
Why Is It Called A ‘Blue Chip’ Stock?
The term ‘blue chip’ was taken from the poker industry, where blue casino chips are among the highest-valued chips at any given moment in time.
The term has been around for more than 115 years and is still a common investment term used every single day by all different types of investors.
How to Buy ‘Blue Chip’ Stocks
As an investor, you can purchase blue chip stocks and add them to your portfolio.
These types of stocks can be found on any major North American stock exchange during regular trading hours.
You could also acquire blue chip stocks through exchange-traded funds (ETFs).
Some ETFs have a higher percentage of their holdings allocated to blue chip stocks, while others may have less.
Regardless, buying blue chips stocks can be an excellent investment choice for the long-term.
Blue chip stocks are known for being reliable, even in the harshest economic conditions.
They generally bounce back much quicker than other stocks and are less volatile during bearish market conditions.
Can You Lose Money On ‘Blue Chip’ Stocks?
Unfortunately, the possibility of losing money is always present when investing.
Blue chip stocks have solid reputations, but there’s still a chance of seeing your portfolio drop even with these types of stocks.
However, most blue chip stocks will always grow in the long-run if their basic investment fundamentals are good.
This could mean cash-flow, growth, profitability, and sustainability.
Experienced investors seek out certain blue chip stocks to add a layer of security to their portfolios.
This can also be accomplished through acquiring investments like blue-chip ETFs. While it’s unlikely to lose money in long-term investing when adding blue chip stocks to your portfolio, it’s entirely possible to experience short-term losses.
Conclusion
In conclusion, blue chip stocks are massive companies with significant market caps, less volatility, and a reputation for generating consistent profit and dividends.
However, any reliable performance in the past from blue chip stocks is no guarantee for the future.
Short-term traders may find less benefits in blue chip stocks than investors that hold their portfolios for longer periods of time.
We hope you enjoyed this article about blue chip stocks.
If you have any questions, please send an email or leave a comment below.
Trade safe!
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
