The term, blue chip stocks, originated from poker where the blue-colored chips are the costliest and the most valuable. Blue chip stocks are high-priced stocks belonging to companies that maintain a sound record of financial stability and credibility for numerous years. Mostly, the companies with blue chip stocks are not only premium but also dominant in their industry. They are enlisted among the best organizations in their respective sector. Most of the times, a blue chip stock has records of yielding consistent dividends to its investors over the long run.
Examples of blue chip stocks
Some of the leading Indian companies with blue chip stocks are Tata Consultancy Services, Bharti Airtel, State Bank of India, Infosys, GAIL, ITC, Aurobindo Pharma, and HDFC.
What makes blue chip stocks good investments?
Blue chip stocks are stocks of established companies. Most of these stocks generate stable returns for investors. Because of this consistency, investors are protected from market recessions inflation and economic downturns.
As blue chip companies offer regular dividends to the shareholders, it helps them earn a regular income. Strong financial position, a great balance sheet, stable growth rate, and the best managerial team are some of the traits of a blue chip company that make their stocks a worthy investment.
Who should invest in blue chip stocks?
Every person has a different objective of making investments. Some seek high gains, while others are content with receiving stable returns in the long run. Blue chip stocks are the best source of investments for individuals who want secure returns and are not big fans of volatile markets.
In the presence of superior operational efficiency of the companies, placing a bet on blue chip stocks can further reduce the chances of heavy losses. These stocks are favorites among affluent investors who are experienced in making worthy investments.
Blue chip stocks are synonymous to fewer debts, consistent dividends/returns and goodwill of the company. Such stocks are not only safe, but also help investors in mitigating risks. A company having diversified operations won’t see much fluctuation in its stock price, even if its financial performance is not up to the mark for a few months or a year. Here, we assume that the company will cover the losses of one business function from its other business areas.
In a nutshell, by investing in blue chip stocks you reap the benefits of getting high returns on capital and generating regular periodic income.