What are Blue Chip Stocks

 LETS UNDRSTNAD

What are Blue Chip Stocks?

Blue-chip stocks are highly priced market stocks that have emerged as a preferred investment option over recent years. The companies that issue blue-chip stocks are highly esteemed in the stock exchange market and tend to have a stable financial record and credibility. 

Besides their repute, the fact such companies extend attractive dividend pay-outs can be credited for the growing popularity of the said stock. However, before investing in blue-chip stocks, individuals should equip themselves with a few essential details.

Stocks that are issued by blue-chip companies, i.e. companies with a large market capitalization, are termed blue-chip stocks. Companies that issue these shares are well-established and enjoy great market repute; therefore, the shares issued by them are highly valued in the market. 

Features of Blue-chip Stocks

The features of Blue-chip stocks are listed below –

• Assured Returns

Blue-chip stocks generate returns quarterly in the form of dividends. The fact that companies which are well-established also serve as a safe investment avenue for most investors. With this safety comes the assurance of earning steady but guaranteed returns.

• Credit-worthiness

Blue-chip companies have enough capital to clear their financial dues and obligations easily. This, in turn, makes the shares issued by such companies high in creditworthiness.

• Risk Factor

Since big companies with stable financial performance issue these stocks, the risk factors associated with blue-chip stocks are comparatively less.  Investors can further reduce the burden of risk associated with blue-chip shares by diversifying their INVESTMENT 

• Investment Horizon

The term of investment is usually over 7 years. Such extended term makes Blue-chip stocks suitable for achieving long-term financial goals owing to their long investment horizon.

• Growth Prospect

Blue-chip companies are those large companies that have reached their maximum growth potential. This influences the Blue-chip shares in India, which undergo slow but steady growth over time.

Reasons to Invest In Blue-Chip Stocks

Blue-chip stocks in India are considered to be a desirable investment option for achieving long-term financial goals. Here are a few reasons to invest in Blue-chip shares –

• Offers higher returns that are paid quarterly.
• Facilitates corpus building.
• Facilitates portfolio diversification.
• Cushions the impact of the recession, inflation and economic stagnation.

However, owing to their higher price, blue-chip shares may not be suitable for small investors. 

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