Blue Chip Stock

What Is a Blue Chip Stock ?

A bluing chip banal is a huge company with an excellent reputation. These are typically bombastic, well-established, and financially audio companies that have operated for many years and that have dependable earnings, often paying dividends to investors. A bluing chip stock typically has a commercialize capitalization in the billions, is by and large the market drawing card or among the lead three companies in its sector, and is more frequently than not a family name. For all of these reasons, bluing bit stocks are among the most popular to buy among investors. Some examples of bluing chip stocks are IBM Corp., Coca-Cola Co., and Boeing Co .

Key Takeaways

  • Blue chip stocks are huge companies with excellent reputations, often including some of the biggest household names.
  • Investors turn to blue chip stocks because they have dependable financials and often pay dividends.
  • There is a perception among investors that blue chips can survive market challenges of many kinds; while this may be largely true, it is not a guarantee. For this reason, it’s crucial to diversify a portfolio beyond only blue-chip stocks.

Reading: Blue Chip Stock


Blue-Chip Stock

Understanding a Blue Chip Stock

While dividend payments are not absolutely necessity for a banal to be considered a blue check, most blue chips have long records of paying stable or rising dividends. The terminus is believed to have been derived from poker, where blue chips are the most expensive chips .

A bluing bit banal is generally a part of the most reputable marketplace 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 TSX-60 in Canada, or the FTSE Index in the United Kingdom .

How big a company needs to be to qualify for gloomy chip condition is afford to debate. A broadly accepted benchmark is a market capitalization of $ 5 billion, although market or sector leaders can be companies of all sizes. The T. Rowe Price Blue Chip Growth Fund does n’t have a specific guidepost for what type of ship’s company qualifies outside of focusing on large-capitalization and mid-cap companies that are well-established in their industries, although the median marketplace cap of the fund ‘s holdings has historically been in the range of close to $ 100 billion .

The Safety of Blue Chip Stocks

While a blue sky chip party may have survived several challenges and market cycles, leading to it being perceived as a safe investment, this may not always be the case. The bankruptcies of General Motors and Lehman Brothers, a well as a number of leading european banks during the global recession of 2008, are proof that even the best companies may struggle during periods of extreme point try .

Blue Chips as Part of a Larger Portfolio

While bluing chip stocks are allow for practice as effect holdings within a larger portfolio, they by and large should n’t be the stallion portfolio. A diversify portfolio normally contains some allocation to bonds and cash. Within a portfolio ‘s allotment to stocks, an investor should consider owning mid-caps and small-caps vitamin a well. Younger investors can by and large tolerate the hazard that comes from having a greater percentage of their portfolios in stocks, including blue chips, while older investors may choose to focus more on capital preservation through larger investments in bonds and cash .

What Makes a Company a Blue Chip?

Blue chip stocks are the titans of their sectors—industry-defining companies that are long-familiar, well-capitalized, long-run stable plays with solid fiscal prospects .

What Companies Are Considered to Be Blue Chips?

many of the largest companies in the S & P 500 or the Dow 30, such as IBM, JPMorgan Chase, or Walmart .

Where Does the Term “Blue Chip” Come From?

The term “ amobarbital sodium chip stock ” comes from the world of poker, where chips used in gambling have different colors to represent different dollar amounts. A gloomy chip is typically the one with the highest value of all, surpassing white chips and crimson chips .

Are Blue Chips a Good Investment?

A diversify portfolio might include the ownership of a rash of blue-chip stocks, meaning the stocks of big, well-capitalized, well-understood companies, among a assortment of other holdings. In summation to owning individual stocks, investors may besides seek to have blue-chip exposure through the purchase of common funds or exchange-traded funds ( ETFs ).

How Do I Invest in Blue Chip Stocks?

A market player can buy blasphemous chip stocks individually, or by buying common funds or exchange-traded funds ( ETFs ) that invest in blue-chip stocks. In some cases, funds and ETFs will hold a assortment of stocks and asset classes, including blue chips. In other cases, the funds or ETFs might be focused entirely on blue chips, such as an ETF that tracks the Dow Jones Industrial Average, which comprises 30 of the largest blue chip stocks .

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