In the world of poker, chips are your representatives for money, and no matter where you go, blue chips are usually the highest valued chips. Knowing this, it doesn’t come as a surprise that blue chip stocks are the stocks of companies with the highest values across different exchanges. Companies like Microsoft, Apple are all blue-chip companies with blue chip stocks. These stocks are generally considered safe stocks, that have a great proven track record and are well-established and have shown their reliability over a long period of time. Any company listed as a blue-chip company is fiscally and financially sound and protected from the volatile cycles of the market and company itself.
In this article we will go into detail about blue-chip stocks and how trading with them works. Read ahead to grasp the basics of blue-chip stocks and how they can be the way to invest your own money with confidence.
What to do with Blue-Chip Stocks
Blue-chip stocks are known by many names, such as bellwether, market leader and large cap. These names all signify a different thing, bellwether stock is usually a large company whose performance signals the direction a particular industry will go, market leader is used to describe a leading company in its field, and large cap means a company’s overall market capitalization is quite high.
When building a strong online portfolio, blue-chips are crucial. This is due to the fact that even after a bearish market movement, these stocks will usually rebound. So, when the market is trending down, blue-chip stocks make for a good investment, and they help you earn a stable income while chasing the big one. Considering these stocks pay steady dividends, they are a good source for supplementing your income.
To find blue-chip stocks, a simple Google search will provide you with lists of blue-chip companies. Two examples of these lists are the S&P’s Dividend Aristocrats and Mergent’s Dividend Achievers. There are many more lists available to you beyond these two. Blue-chip stocks are usually listed on the most reputable market indexes or averages, such as the Dow Jones Industrial Average, the Standard & Poor’s (S&P) 500, and the Nasdaq-100 in the United States, the FTSE index in the United Kingdom, and TSX-60 in Canada.
Why Blue-Chip Stocks
Requirements for being a blue-chip stock is up for debate, but generally an accepted benchmark is a market capitalization of $5 billion. While this remains true, smaller companies can still be market leaders thus becoming blue-chip companies. The reason these companies and stocks are safe bets, are due to the fact that they predominantly survive the errand movements, challenges and cycles of the markets. While 2008 showed this is not always the case, companies like Coca Cola, Intel, IBM and Apple are expected to continue making their investor’s money and remain powerhouses. Blue-chips are the closest things to a sure thing in the finance world. According to Forbes, one dollar invested in blue-chip stocks in 1802 would have been worth mare then $350,000 in 1995, a return like this is rarely seen in the world of finance.
When you want to go with an investment that will reduce your risk and make you small guaranteed dividends, there isn’t much doubt where you should go. Blue-chip stocks are the industry standard in reliability and strength, so invest with confidence in knowing these world giants will always be there regardless of how volatile the market may be.