Updated Mar 23, 2022

What is Blue Chip Stock ?

What is Blue Chip?

 

 

Blue Chip stocks are noted for their capacity to survive a variety of market situations while also producing large returns when the market is favourable. Blue-chip corporations are typically not only premium but also dominating in their industries. They are considered to be among the greatest in their respective fields. The majority of the time, a blue-chip stock has a track record of paying steady dividends to its shareholders throughout time. 

 

In 1923, Dow Jones employee Oliver Gingold developed the term "blue chip." Gingold coined the term after noticing many stocks trading at $200 or more per share while standing near a stock ticker at a brokerage firm. He coined the phrase "Blue Chip Stocks" and published an article on them. This is how the phrase originated. Since then, the term has been used to describe high-priced stocks, albeit it is now more commonly used to describe high-quality shares.

 

These are equities that have historically provided exceptional long-term returns. Some individuals also associate blue-chip stocks with blue betting discs in poker, where the blue disc has the highest value and the white disc has the lowest. A variety of factors can be used to identify blue-chip companies. They include a stable debt-to-equity ratio, average return on equity (RoE), and interest coverage ratio, in addition to market capitalization and price-to-earnings ratio (PE).

 

India's leading blue-chip companies presently, in terms of market capitalization, are:

 

• State Bank of India (SBI), 
• Bharti Airtel, 
• Tata Consultancy Services (TCS), 
• Coal India, 
• Reliance Industries, 
• HDFC Bank, 
• ONGC, ITC, 
• Sun Pharma, GAIL (India), 
• Infosys, 
• ICICI Bank.

 

 

Who should buy blue-chip stocks and why?

 

Blue-chip securities are considered good investment options, and they can even help investors balance the overall risk of their portfolios. However, it is a typical assumption when making such an investment that a company would have varied operations and will not be influenced by stock market swings. Even if a company's financial performance falls short of expectations for a period, the company's other business divisions can offset most of the losses sustained in a particular function.

 

These equities are favored by cash-rich investors with a track record of making high-value investments.

 

Blue-chip companies are a good choice for investors who don't want their investments to be harmed by a significant economic slump. While the majority of these stocks pay dividends, it is recommended that investors diversify their portfolios to prevent company-specific risks. Furthermore, because most blue-chip investments provide greater long-term returns, investors who are comfortable staying invested for seven years or more may select blue-chip stocks.

 

 

Feature of Blue chip stock

 

High returns:

Because blue-chip companies are industry leaders, they have a better chance of growing and hence delivering larger profits.

 

Low Volatility: 

Blue Chip stocks are those that belong to corporations that are financially stable and have good corporate governance standards. As a result, the companies are more stable and less affected by market fluctuations.

 

Dividend Income regularly:

Companies with a large cash surplus and the ability to pay regular dividends to investors are considered blue-chip investments.

 

Popular industry Pioneers:

These stocks belong to companies that have a strong reputation for leading the market and possess industry expertise.

 

Provide Years in Business:

The blue-chip stock is the outcome of the company's long-term hard work and growth. These companies have been in business for a long time and have excelled at it.

 

Exceptional Results During Economic Downturns:

When we talk about blue-chip stocks, we're talking about stocks that continue to perform well even when the market or economy is through a downturn.

 

Credit-Worthiness:

Blue-chip enterprises have high creditworthiness, which means that they can pay off their loans and other financial obligations.

 

 

The following are some of the best-performing blue-chip funds:

 

A blue-chip fund invests in companies that are well-known and financially secure. These funds invest in the equities of companies that are often market leaders with a proven track record. Companies that pay dividends regularly and have been profitable over time are included in these funds.

 

Because funds are handled by experienced fund managers, it is frequently preferable for beginning investors to invest in blue-chip funds rather than blue-chip stocks individually. This is because novice investors may not always have the experience to select the best stocks to invest in. Some of the best-performing blue-chip funds are listed here.

 

• Axis Bluechip Fund Direct Plan-Growth
• Kotak Bluechip Growth Direct
• BNP Paribas Large Cap Fund Direct Plan-Growth
• Edelweiss Large Cap Direct Plan-Growth
• UTI Master Share Growth Option
• LIC MF Large Cap Fund Direct Plan-Growth

 

When investing in blue-chip companies or funds, keep in mind that they are typically part of a buy-and-hold strategy and require a longer investment time frame. These can be an important component of a well-diversified portfolio, which should also include lower-risk investments like bonds.

 

 

FAQS

 

Is it wise to invest in blue-chip stocks?

Blue Chip stocks are best for investors who want to take a conservative attitude to risk and have long-term goals with a time horizon of at least 5-7 years. Blue-chip stocks should be considered by investors who want to develop their wealth over time without being exposed to a lot of risk and market volatility.

 

What type of Blue Chip Fund do I invest in?

On the Finity app, you can find some of the best-performing blue-chip funds. Before choosing a fund, investors should always look at its past performance.

 

What is the distinction between a blue-chip stock and a common stock?

Blue-chip enterprises have withstood the test of time and demonstrated their worth via consistent success, even in tumultuous markets. The market capitalization of blue-chip stocks is enormous. A company's market cap is a measurement of its size and value. The investor's ownership in the corporation that it represents is represented by common stock.