While the investing domain is generally labeled as high-risk-prone and uncertain, blue chip stocks inculcate a semblance of stability in this sphere. These highest-quality stocks offer investors a way to invest in well-established and steadily performing companies amid minimal risk conditions.
In this article, we have explored different aspects of these leading stocks: including what are blue chip stocks? & are they a good investment? Further, we have recorded a blue chip stocks list covering the most prominent & reliable blue chip corporations.
What are blue chip stocks?
Blue chip stocks are the most stable and reliable investments with a proven record of steady growth. The term blue chip is derived from blue-colored chips in poker sets that are one of the highest valued chips in the game.
That said, in the financial world, blue chip are generally the biggest & most dominant companies with a long operating history; hence, investors consider them highly credible. Moreover, most blue chip companies are household names and leaders in their respective industries. Their stable position comes out of their steadfast performance and ability to weather all kinds of economic conditions.
Simply put, blue chip stocks are different from the volatile & high risk-high gain investment products mostly favored by aggressive investors. Instead, they come under the umbrella of relatively conservative investments where consistent returns are acquired over a period of many years or decades.
Key features of blue chip stocks
Investors trust blue chip stocks due to their superior inherent characteristics. Some of them are:
1. Large market cap: Blue chips tend to have a large market capitalization, i.e., the total value of their outstanding shares typically extends to billions of dollars.
2. Consistent growth history: Blue chip stocks exhibit consistent growth and price appreciation over a period of many years. Due to their well-built & solid infrastructure, it is rare for blue chips to display rapid valuation hikes but they do put forward steady gains.
3. Globally recognized brand: The key selling point of blue chip brands is their widespread positive reputation and recognition by global entities. While this broader popularity does not necessarily make them a lucrative investment option, it does demonstrate their might and worldwide acceptance.
4. Dividend payments: Not all, but most blue chip companies disburse dividend payouts to investors from their extra cash flow. As blue chips are chiefly mature corporations, they redirect lesser revenue to growth as opposed to emerging businesses.
5. Mostly a leading part of popular indices: Almost all blue chip stocks hold a stable position in the world’s leading indices like Dow Jones, S&P 500, and NASDAQ.
Should you invest in blue chip stocks?
As we have understood what are blue chip stocks and their primary features, now the question arises are they good investments? The answer is generally yes but note that not all blue chip stocks are equal. Investors must analyze and examine all options instead of blindly becoming comfortable with the “blue chip” tag. While blue chip stocks incorporate a history of resilient performance, they are not entirely immune to bearish market conditions.
On the other hand, blue chip stocks are mostly considered good for portfolio diversification to offset the risks stemming from volatile holdings. Further, they are mainly preferred by risk-averse and old investors who favor stability and reliability.
Here is an overview of some positive and negative aspects of blue chip stocks to help you decide whether they are right for you.
Pros of blue chip stocks
- Blue chip companies are resilient and dependable as they have been functional for decades.
- With a large workforce and worldwide operations & fame, these companies are trustworthy and keep their activities transparent.
- Blue chips almost always recover even after a bad economic phase. However, it may not always be true.
- They are essentially less volatile with solid fundamentals, hence suitable for beginners and passive investors.
- The majority of blue chip companies offer monthly or quarterly dividends, so they can be appealing as a passive income source.
Cons of blue chip stocks
- Generally, blue chips are expensive stocks as they belong to the most established companies.
- Blue chip stocks do not proffer dramatic returns as they are already heavily priced. They register a slow and less exciting growth rate, which might remain stagnant for a long time.
Blue chip stocks list – 8 best blue chip stocks to buy now
Apple (APPL): Apple is a leading part of the blue chip stocks list with a market cap of 2.47 trillion USD. It is a multinational technology company that manufactures electronic devices like mobiles and laptops & manages many online services.
Johnson & Johnson (JNJ): Johnson & Johnson is one of the oldest healthcare companies, with a market cap of 434 billion USD. JNJ produces pharmaceuticals and several medical-related products.
Visa Inc. (V): Visa, a globally known name, is another significant component of the blue chip stocks list. It is a financial services company that supports electronic money transactions globally via debit and credit cards.
McDonald’s Corp (MCD): McDonald’s is a US-based, world’s largest fast food chain with outlets in more than 100 countries. MCD stock has a current market cap of approximately 190 billion USD.
JP Morgan Chase (JPM): JP Morgan & Chase is one of the largest and oldest financial institutions. The banking company offers investment, commercial banking, asset management, and other financial services to worldwide consumers. JPM is a prominent constituent of the blue chip stocks list, with a total market cap of nearly 350 billion USD.
Coca-Cola (KO): Coca-Cola is a multinational beverage company offering products under 500 brand names in almost 200 countries.
Tesla (TSLA): Tesla is a household name and a principal part of the blue chip stocks list, with a market cap of more than 900 billion USD. It is a well-known automotive company that manufactures EVs, battery systems, solar panels, and similar products.
Amazon (AMZN): Amazon is a leading multinational technology company specializing in e-commerce, artificial intelligence, and cloud computing. AMZN’s market cap stands at a whopping 1.30 trillion USD, making it one of the most remarkable blue chips.