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Blue Chip Stocks – Definition, Risks, Future Prospects, Benefits, Features, And Limitations

Blue Chip Stocks

For all the stock investors investing in established and industry-leading companies is the best way to earn assured dividends and avoid risks. 

Blue chip stocks are from the high quality, well-known companies (one of the three leading companies in the industry) in the industry that are trustworthy and capable of surviving any scale of market challenges based on their previous track record. 

The term blue chip comes from poker games. There are several colors of chips involved during gambling. The blue chip among all the chips is of the highest value. 

These stocks are valued and respected among the shareholders for their –

  • Regular payments of dividends
  • Strong business models
  • Attractive and assured returns

Simply, Blue chip stocks are equities that are more secure and profitable due to their dominance in the market. 

More conservative stock investors love to invest in blue chip stocks knowing that they will generate higher ROI and put their money into work. 

These stocks are of companies with market caps in billions, and they are well-reputed in the global market. 

As a new investor, if you are interested in stocks of this type, the following article may help. Here I have relayed all the valuable info about blue chip stock that a beginner investor needs to know. 

What Are Blue Chip Stocks?

Blue chip stocks are from companies that are reputed industry leaders and are always running on profit. These companies are the industry leaders, and they often pay dividends to their shareholders. 

The blue chip stocks are more dependable; according to their religious investors, stocks of this type can survive any type of challenge. Looking at the characteristics will make it more convincing. There are several characteristics of the blue chip stocks; for instance–

  • Companies offering such stocks are industry pioneers with dependable business models.
  • They have a strong track record to earn the trust of the shareholders and the shareholders.
  • According to more experienced and conservative stock investors, they have been delivering profitable returns. 
  • They pay regular dividends to the inventors and also increase the payout on each new term.
  • Such stocks facilitate corpus building which is a good reason for investing in blue chip stocks. 
  • Portfolio diversification in blue chip company stocks reduces the risk factor for investing

Examples OF Blue Chip Stocks

The companies that offer such stocks are so well reputed that you already know them even if you have never invested before. Once you know how to invest in stocks you can start investing even in blue chip companies. Here I have listed some of the best blue chip companies-

Apple

Apple

Apple has been the pioneer in the mobile and laptop industry. The company has broken boundaries by innovating several intuitive techs like the iPhone, iPad, MacBook, Apple Watches, and so much more. 

Apple earns increasing profit from its products and services like iTunes, Apple TV, and App Store. There is a possibility to earn huge profit from this blue chip company’s stocks.

Coca-Cola

Coca-Cola 

In the beverage industry, Coca-Cola has remained a leading name for decades. It is one of the most favored soft drinks that most global consumers love to drink. The company has diversified itself by producing a wide range of health drinks, sports drinks, and much more. 

Microsoft

Microsoft

Another leading company in the computer industry is Microsoft. The company has been earning an increasing amount of profit. It has a huge market cap of $1,966.6 billion. 

Johnson & Johnson

Johnson & Johnson 

For years, Johnson and Johnson have been leading the industry of baby care products. Form baby oils to shampoos, soap, and a wide array of medical and health-aiding products come from this company. Like all the three other companies, Johnson and Johnson is also a blue chip company. 

Features Of Blue Chips Stocks

Features Of Blue Chips Stocks

Since you have already read the above sections, you are already quite familiar with the characteristics of blue chip stocks. Still, here are some of the highlighted characteristics of the blue chip companies and their stocks–

  • The blue chip companies have little to no debt.
  • These are the industry-leading companies, so the market cap is usually in billions. They areusually the large cap stocks.
  • In such companies, the debt-to-equity ratio is stable
  • Investors get high returns on their investments. They also gain regular dividends.
  • There is a very little risk factor involved in blue chip stock investments. 
  • The investment horizon is usually longer than seven years. Such investments are good for long-term financial goals
  • The growth prospect in Blue chip company stocks is slow but steady and most assured. 

Benefits Of Investing In Blue Chip Stocks

Benefits Of Investing In Blue Chip Stocks

As an investor who keeps investing regularly, blue chip stocks offer investors various benefits. Some of the benefits of such investment include –

  • As an investor, you get assured and stable dividends paid to you regularly.
  • If you are trying to meet a financial goal, blue chip stocks are good investment choices. 
  • A diversified investment portfolio allows investors to make money from multiple channels while reducing the risk of losing their money. 
  • Such stocks are liquid in nature. So, you have no problem trying to sell them due to their high requirement and trustworthiness in the market. 

Blue Chip Stocks Risks And Limitations

Blue Chip Stocks Risks And Limitations

Such stocks are less volatile, and they are good for long-term investments. When investing, you need to remember a few things- 

  • Such investment should be at the center of your portfolio but not the only type of investment. 
  • They are low-risk and low-return investments
  • It is better to consider your risk appetite before investing in any low-cap stock. 
  • It would help if you made it a long-term financial goal. Otherwise, if you want returns within a short time, you won’t see much profit. 

Blue Chips companies offer you a better chance of performance, but you should not take anything for granted. They are still stocks, and they rise and fall frequently. 

Blue Chip Stocks Future

Blue Chip Stocks Future

When you look at the various features and the benefits of investing in such stocks, the future of blue chip company stocks look good. 

As a conservative investor who wants consistent profit at a low-risk margin with a definite financial goal, you can easily choose stocks from blue chip companies.

These stocks are not highly volatile, so they have a strong chance of surviving in a turbulent stock market. In addition, investors get their dividends paid quarterly, so they are good for long-term investment.

Frequently Asked Questions

Some of these popularly asked questions might help you understand better about these stocks- 

Q1. Is Bluechip A Good Investment? 

Ans: The blue chip companies are industry-leading companies. They are mostly running on profit and offer a good opportunity of earning a good return in long-term investments.

Q2. What Is An Example Of A Blue Chip Stock? 

Ans: Most of the industry-leading niche brands are usually blue chip companies. So you can take Apple, Microsoft, Coca-cola, etc.

Q3. What Are Considered Blue Chip Companies? 

Ans: Most of the industry-leading niche brands are usually blue chip companies. So you can take Apple, Microsoft, Coca-cola, etc. Such companies have a market cap of billion dollars. They also have good recognition among investors and consumers.

Bottom Line 

Many blue chip companies offer investors profitable investment choices in the long term. Investors looking for low-risk stocks that regularly pay dividends can profit from investing in Blue chip stocks.

Did you find this article helpful? If there is any information missing, you can let us know in the comment. Also, if there is any query related to the topic, you can ask that here as well.

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