Blue Chip is the stock of well-established and strong financially which has earned profit for many years. The market capitalization of blue-chip stocks is generally in the billions. They are usually market leaders or one of the top three companies in their industry. And often their name is known from house to house. The past record of such companies is better, but even at present, their business is going well. If seen from the point of view of market capitalization, most of the blue chip stocks are large cap and some can be mid cap too.
Not only this, it also includes companies whose market capitalization is high. Along with this, profit and sales are also increasing continuously. And in the last few years, you can consider those companies as a blue chip company by making good profit to your investors.
The market capitalization of blue chip companies is huge, so this company is a leader in its trade and industry. Therefore, Investors put more trust in such companies and like to invest here. One of the reasons for this is also that they are very strong financially; due to which they do not have much effect even when there are ups and downs in the market.
Blue Chip are Shares Safe to Invest :- While blue chip companies survive many challenges and market fluctuations to an extent and that is why they are considered as a safe investment but this may not always be the case. Even the best companies can struggle during periods of market depression.
Blue Chip Shares are Investors’ Choice :- Blue Chips have strong balance sheet and cash flow, strong business model and consistent growth potential. Many investors consider blue-chip stocks to be a safe investment. Long-term investors keep their investments in blue-chip stocks to grow rapidly over time and receive regular dividend payments.
Blue Chip Shares Have Stability :- Most of the investors know that Blue Chip stocks can have steady earnings. During the economic downturn, Investors can invest in these due to their safe nature. Blue chip companies provide security during slow economies due to their intelligent management teams and ability to generate stable profits. If there is a downturn in the stock market, then investors should get blue-chip Stock. No need to worry about your investment in chips as they usually recovers quickly.
Part of portfolio :- Portions of chip stocks are suitable for use as core holdings in a portfolio but generally should not be the entire portfolio. A diversified portfolio should generally consist of all types of stocks. In the stocks of the portfolio, an investor can choose between mid-caps and small-caps. There should also be caps. New investors should generally keep risk-tolerant stocks in their portfolio along with blue chips.
Better investment option :- So, in this way we see that investing in Blue Chip Shares is a better option. These companies grow regularly and the investment remains stable. These companies regularly try to benefit the investors and shareholders with dividends and bonus shares.
Why these stocks are called Blue Chip Stocks?
There is an interesting story behind this, after the end of the First World War, there was a lot of change in the thinking of the people and games like poker became very popular.
The blue chips used to be the most valuable in the game of poker and one of American Journalist post article about the stock of some big companies of America using blue-chip word. Since then this word has become very popular till date.