Blue Chip Stocks


Blue chip stocks are shares of very large and well-recognized companies with a long history of sound financial performance. These stocks are known to have capabilities to endure tough market conditions and give high returns in good market conditions. Blue chip stocks generally cost high, as they have good reputation and are often market leaders in their respective industries.

What makes a stock a blue chip?


Think of a blue-chip stock as a stock you would bring home to meet your parents: It makes a good impression and has the substance to back it up. It’s stable, responsible and reliable.


Blue-chip companies have proven themselves in good times and bad, and the stocks have a history of solid performance. Stocks that are considered blue-chip stocks generally have these things in common:


Large market capitalization: Market cap is a measure of the size and value of a company. Blue-chip stocks are often large-cap stocks, which typically means they have a market valuation of $10 billion or more.


Growth history: Blue-chips have a reliable, solid history of sustained growth and good future prospects. They might not be flashy like fast-growing tech stocks, but that’s because they’re already established.


Component of a market index: Blue-chip stocks are in major market indexes like the S&P 500, the Dow Jones Industrial Average and/or the Nasdaq 100.


Dividends: Not all blue-chip stocks pay dividends, but many do. Dividends are regular payments made to investors from a company’s revenue. Companies that pay dividends are often mature, which means they may no longer need to invest as much revenue back into their growth.

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