What is a blue chip stock?
As a stock market for beginners definition a blue chip stock definition is that it is the leader of the whole industry and that may well mean that this stock is fairly good stock to buy right now or at any time for that matter and also this company has excellent leadership, have excellent track record and great financial strength. This stock when they announce the results it sets the tone for the whole market. These are also known as bellwether stocks as they really in all sense lead the market.
Some examples of the blue chip companies and these are the best blue chips to invest in
Intel(INTC)
Wal-mart(WMT)
Coca-Cola(CCE)
Berkshire Hathaway (BRK)
Exxon-Mobil (XOM)
Google (GOOG)
Unilever (UL)
PepsiCo (PEP)
3M (MMM)
Mcdonalds(MCD)
Cisco(CSCO)
Apple Inc(APPL)
Major factors why they are called blue-chip stocks are
Well established leadership in the industrial segment
Financially sound
Dividend paying
Established good model of governance
Less risk stocks
High Credit rating
Diversified
The name “Blue-chip” came from Poker
In poker the blue chips have the highest value and hence the name blue chip. The blue chip stocks are less volatile and that is why in general it is easier to have these stocks in your portfolio. So if you are building your portfolio of stock then it should have the industry bellwether stocks so as to provide cushion in good times and bad times.
Investing blue chip companies is considered safe and people also call that as a sign of passive investing. Well active or passive you need to have these in your bag as good stocks for growth.
These blue chip companies for long term are not those multi baggers that you keep hearing all the time but these definitely pay you over the longer term. That means they have the staying power.
The best time to invest in blue chip stocks
There is nothing called the best time and you simply have to have a plan to buy the blue chip companies as and when the price dips. The credit crisis in 2008 presented a great opportunity to invest in these blue chips.
Now you may be wondering that apart from the list that I gave you here what are the best companies which are the so called blue chip companies then I can safely say that the companies that make up the Dow Jones Industrial Average (DJIA) are the best blue chips. NIFY Fifty is another good place to start.
There should be no exit points
Any downward market trend should be seen as the entry point for investing for long term in the blue chips. There no such thing as momentum stock investing for bleu chips. Just keep buying them. Do not think of selling them for the next ten years or even more. These are investments that you will have to make when you are making decision about future income as well as sound financial planning.
Where to buy blue chips.
You can buy blue chips from a discount stock broker or you can buy one share of stock or you can even buy stocks without a broker directly from the company. You can even purchase the blue chip mutual funds or the diamonds.
Then there are SPDRs, HOLDs. All these represent a basket of companies which are mainly blue chip companies.
Related posts:
- Blue chip mutual funds
- Investing in stocks – Go buy Best Blue Chip Stocks
- What are blue chip stocks and have they delivered blue chip returns?
- Dow Jones Blue chip stocks
- Top blue chip stocks and investing blue chip stocks for long term
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