What is a blue chip company?
A blue chip company is financially sound and well established.
These companies usually sell well-known and high-quality products and services. They have a record of stability and steady growth because they can operate in difficult economic conditions.
Most share the following characteristics:
- Value in the billions
- Household name
- Good reputation
- Dependable earnings
- Pay dividends
- Leader in their industry
Why is it important?
They usually perform well in good times and bad and are considered a safe investment.
- Wells Fargo
- Home Depot
Calculator: How fast can your money grow?
Investors may buy blue-chip companies to provide steady growth in their portfolios. The stock price of a blue-chip company usually closely follows the S&P 500, but blue-chip stocks shouldn’t compose the entire portfolio, which should be diversified, with a broad mix of stocks to spread out risk.
Not guaranteed to increase in value
Although blue-chip companies have survived challenges and market cycles, they may not always be a safe investment. The bankruptcies of General Motors and Lehman Brothers during the recession of 2008 prove that even the best companies may struggle.
- The name “blue chip” comes from poker. Blue chips have the highest value.
- To track blue-chip stocks, keep a close eye on “blue chip” indices, such as the Dow Jones Industrial Average, Standard & Poor’s (S&P) 500, and the NASDAQ-100.
- Apple was given blue chip status in 2015.
- After the stock market crash in 1987, it took two years for blue-chip stocks to recover, but many other companies did not recover for several years.
- http:// www.wyattresearch.com/stocks/blue-chip-stocks/