Investor's wiki

Blue Chip Stock

Blue Chip Stock

What Does "Blue Chip" Mean?

At poker tables, blue poker chips are generally worth the most, followed by red and white chips. For example, blue chips may be worth $20 each with red chips worth $5 and white chips worth $1.
Outside of club, "blue-chip" has turned into a descriptor used to indicate things that are of the highest value or quality inside a specific category. In the investing world, the term is frequently used to depict specific companies or stocks.

What Are Blue-Chip Stocks?

Blue-chip stocks and companies are those that are deeply grounded, have a long and predictable history of growth and earnings, and have a high market capitalization (i.e., are worth large chunk of change as indicated by the market). In easier terms, a blue-chip is a large, regarded, notable, and effective company that has been around for quite a while. These companies are monstrous, financially sound, and have a history of strong earnings. Many blue-chip companies likewise pay dividends to their investors.
At the point when you think of "exemplary" or "major" American companies, a significant number of those that ring a bell are most likely blue chips. JP Morgan Chase, Coca-Cola, Walt Disney, Pfizer, and General Motors are just a couple of models. The Dow Jones Industrial Average (DJIA), a well known stock index, involves 30 major blue-chip stocks yet does exclude each stock that falls into that category.

Qualities of Blue-Chip Companies

Most blue-chip companies . . .

  • have a high market capitalization (typically during the tens or hundreds of billions).
  • are remembered for at least one major stock indexes like the S&P 500 or the DJIA.
  • have been around for quite a while (many years).
  • have a history of resistance to economic recessions.
  • have low volatility and reliable growth.
  • try not to have a nonsensical amount of debt.
  • are notable household names.

15 Examples of Blue-Chip Companies

Alphabet (NASDAQ: GOOGL) Johnson & Johnson (NYSE: JNJ)Proctor & Gamble (NYSE: PG)
Apple (NASDAQ: AAPL)JP Morgan Chase (NYSE: JPM)UnitedHealth Group (NYSE: UNH)
Berkshire Hathaway (NYSE: BRK)McDonald’s (NYSE: MCD) Visa (NYSE: VIS) 
Coca Cola (NYSE: KO)Microsoft (NASDAQ: MSFT) Walt Disney (NYSE: DIS)
## Benefits of Investing in Blue-Chip Stocks Numerous investors decide to incorporate blue-chip stocks (or a [ETF](/indexfund) comprising of blue-chip stocks) in their portfolios due to the benefits they give. Below are a portion of the fundamental benefits that accompany integrating blue-chip stocks into a diversified portfolio. ### Low Risk Blue-chip companies are creditworthy, meaning they have a long history of paying their debts and a lot of capital with which to meet their current financial obligations. Therefore, it is very impossible that they will fail. This makes their stock undeniably safer to hold than the stock of more current companies that have debt, short credit narratives, and less capital. ### Relatively Reliable Returns Blue-chip companies have been around (and been effective) for quite a while, so they will generally create relatively predictable returns over the long term. During periods of economic instability, blue-chip companies ordinarily outperform others, such countless investors treat them as relatively safe and stable investments. ### Low Volatility The stocks of fresher companies that are in growth phases and are as yet extending their operations will generally be highly unstable in price compared to the stocks of mature, deep rooted companies whose business models, revenue streams, and brand characters have been stable for quite a while. Blue-chip companies fall into the last category, so they are a decent decision for investors who favor stability to volatility. ### Dividend Payments Since most blue-chip companies are productive and have been for quite a while, large numbers of them reward their investors with dividends. Dividends are periodic payments companies ship off their investors in view of their profits. Dividends are commonly paid month to month, quarterly, twice per year, or every year. ## Burdens of Investing in Blue-Chip Stocks While blue-chip stocks give many benefits to the people who invest in them, they likewise accompany a couple of disservices for certain investors. ### Unassuming Returns Since blue-chip stocks have been around for quite a while, so they will generally find lasting success however relatively stable. This means that investors can as a rule anticipate predictable however humble returns (and perhaps some dividend payments) in the event that they hold for a long period of time. For investors seeking more substantial returns in the shorter term, in any case, blue-chips may not be as appealing. ### Slow Growth Since blue-chip companies are mature, they're probably not going to experience the kind of fast growth that could lead to large returns over a relatively short period. Assuming you need slow, consistent, unassuming returns, blue-chip stocks are great, yet investors hoping to "get in right on time" before a stock "goes to the moon" would have better karma (along with a lot higher risk) investing in relatively more up to date companies that are still in major growth phases. ### Low Volatility While low volatility is a plus for passive investors who need steady, moderate returns over the long term, this stability isn't as appealing to short-term traders who aim to bring in money by capitalizing on quick changes in price over a shorter period of time. ### Higher Relative Price Since blue chips are so notable and appeal to such countless various types of investors (e.g., dividend searchers, retirement investors, retail investors, institutional investors, and so on), there is a ton of demand for them, so their market prices can be relatively high compared to their alleged [intrinsic value](/intrinsicvalue). ## The most effective method to Invest in Blue-Chip Stocks Blue-chip stocks can make a great expansion to a diversified portfolio. Due to their stable nature, they are an especially attractive decision for long-term investors and dividend investors. All blue-chip stocks are publicly traded, so it's not difficult to buy shares on well known trading applications and sites like Fidelity, Charles Schwab, SoFi, and Robinhood. A few platforms even allow users to trade fractional shares, which makes it simpler to buy stock in blue-chip companies with high share prices. Active investors might need to get some margin to research a number of blue-chip companies before investing in those they accept are the most undervalued in light of their fundamentals. It might likewise be prudent to invest in blue chips across numerous industries (e.g., drugs, banking technology, energy, and retail) for [diversification](/diversification) in case a specific industry endures a shot due to unanticipated conditions.

More passive investors could like to gain exposure to many blue-chip stocks on the double without expecting to conduct too much research by purchasing shares of at least one blue-chip-themed ETFs or mutual funds. Famous blue-chip-centered ETFs incorporate SPY, which tracks the S&P 500 stock market index, and NOBL, which is an assortment of 50 blue-chip stocks whose dividend payments have increased over the long run.

5 Blue-Chip Stocks That Are Known for High Dividend Yields

  1. AT&T (NYSE: T)
  2. Territory Energy (NYSE: D)
  3. Bank of Nova Scotia (NYSE: BNS)
  4. General Mills (NYSE: GIS)
  5. Royal Dutch Shell (NYSE: RDS.A)


  • Blue chip stocks are gigantic companies with magnificent notorieties, frequently including probably the greatest household names.
  • Investors go to blue chip stocks since they have trustworthy financials and frequently pay dividends.
  • There is an insight among investors that blue chips can endure market difficulties of numerous sorts; while this might be largely true, it's anything but a guarantee. Hence, broadening a portfolio past just blue-chip stocks is pivotal.


Are Blue Chips a Good Investment?

A diversified portfolio could incorporate the ownership of a rash of blue-chip stocks, meaning the stocks of large, very much capitalized, surely knew companies, among various different holdings. As well as possessing individual stocks, investors may likewise try to have blue-chip exposure through the purchase of mutual funds or exchange-traded funds (ETFs).

How Do I Invest in Blue Chip Stocks?

A market participant can buy blue chip stocks individually, or by buying mutual funds or exchange-traded funds (ETFs) that invest in blue-chip stocks. At times, funds and ETFs will hold various stocks and asset classes, including blue chips. In different cases, the funds or ETFs may be centered only around blue chips, for example, an ETF that tracks the Dow Jones Industrial Average, which contains 30 of the largest blue chip stocks.

Where Does the Term "Blue Chip" Come From?

The term "blue chip stock" comes from the world of poker, where chips utilized in gambling have various varieties to address different dollar amounts. A blue chip is regularly the one with the highest value of all, unbelievable white chips and red chips.

What Makes a Company a Blue Chip?

Blue chip stocks are the titans of their areas — industry-characterizing companies that are notable, all around capitalized, long-term stable plays with strong financial possibilities.

What Companies Are Considered to Be Blue Chips?

A considerable lot of the largest companies in the S&P 500 or the Dow 30, like IBM, JPMorgan Chase, or Walmart.