Blue chips are shares of a well-established company with stable finances. The word blue chip comes from the casino, where the blue chip refers to the counter that has the highest value.
Most blue chip stocks pay reasonable dividends; it’s even if the company is doing worse than usual. Shares of companies with multibillion-dollar turnover, such as Microsoft, P&G, etc., are some of the best stocks of blue chips. They are relatively safe compared to other investment options.
Why invest in blue chip stocks?
There are many reasons why investing in blue chip stocks is a good option, these are:
1. Proven track record: Companies will have a confirmed track record. Even as industrial trends decline, they suffer very little. These companies have probably gone through the same problems before and will have a clear idea of how to deal with these situations.
2. Diversity: These companies have diverse interests and will not focus on just one sector or product. As a result, they suffer less when one sector slows down because other sectors that perform better will compensate for losses.
3. Stable growth: these companies will have stabilized growth as opposed to new companies. New companies can make a profit in one quarter and then lose in the next, their growth uneven. Shares of blue chips can easily yield a profit of 15% year on year.
4. Best long-term bets: The best stocks of blue chips may be the best for long-term investments. They provide excellent results in the long run. These companies will have a proper foundation, and after a while there will be only one way left, that is UP. Keep them as a first option if you plan to invest in the long run.
The main question here – how to recognize the shares of blue chips?
Four ways to identify blue chip stocks:
1. Strong balance:
These companies will have very strong balance sheets. Moderate and low debts will be observed along with a history of successive dividends.
2. Strong order book:
These companies are characterized by strong order books consisting of billions of dollars. Strong order books suggest that the company’s growth will not stop under any circumstances. The company will continue to grow, which is very important for the investor.
3. Market capitalization:
The market capitalization of blue chip stocks will be one of the highest in the stock market. If the market capitalization of a particular stock is billions of dollars, it should be a stock of the best blue chips.
4. Various interests:
These companies will have diverse interests and will not focus on one specific sector or interests.
If the stock shows these characteristics, it can be called a blue chip stock.
Well, I hope this article has given you enough information about blue chip stocks. Use this information to find the best stocks with blue chips you can invest in and let the money come in. Promotions with blue chips can prove to be your personal money-making machine.