Blue Chip Stocks Definition.

Blue Chip Stocks Definition.

Blue Chip Stocks Definition.
Blue Chip Stocks Definition.


What are blue-chip stocks?

Blue-chip stocks are shares of exceptionally enormous and all around perceived companies with a long history of sound financial fulfillment. These stocks are known to have capacities to persevere through extreme economic situations and give exceptional yields in great economic situations. Blue-chip stocks commonly cost high, as they have great notoriety and are regularly market leaders in their industries i.e. a company that is viewed as blue-chip will, in general, be at or near the very top of its sector, feature on the perceived index, and have a notable brand.

 

Examples of blue-chip stocks:

There is not a proper rundown of blue-chip stocks be that as it may, ordinarily, the components represented in a well-known index will be considered thusly and are alluded to as blue-chip indices. This incorporates global indices, for example, the Dow Jones, the DAX, CAC 40 and Euro Stoxx 50. Indices like the FTSE 100 and S&P 500 contain a mix of blue-chip stocks and large or mid-cap companies that aren’t considered blue chip.

 

Blue-chip stocks are liable to change, however, some common example includes Coca-Cola, Disney, Intel, Apple, IBM, Johnson & Johnson, Microsoft, Nike, and so on.

 

Pros and cons of trading blue-chip stocks:

Pros of blue-chip stocks:
  • Stability: Blue Chip stocks sometimes do fail, or crash, like others, but far less frequently.
  • Strong financial performance.
  • Potential for regular dividends.
  • Lower downside risk.
  • Less volatile.
  • Steady long term returns.
  • Well regulated and governed.
 Cons of blue-chip stocks:
  • Lower Volatility: Blue chip stocks are quite stable with a robust financial position and therefore considered to be unsuitable for making profits through the day to day trading.
  • Low Returns: Though these stocks provide regular returns, but the dividends are usually of little value and not that impressive.
  • Conservative At Times: These stocks belong to big brands which hold a high reputation in the market and therefore are resistant towards high risk involved in taking up new business opportunities.
  • High Value or Expensive: The price of these stocks is quite high since they belong to large-cap companies and have appreciated over the years of consistent performance.
  • Slow and Steady Growth: The blue chip stocks show a progressive growth but cannot be termed as high return investment due to stable earnings.
  • High Downside Risk: There is a considerable market risk associated with the blue chip companies too. The reason being, some of these organizations fail to keep up with the competition, leading to the downfall of their stock prices.

 

Think we missed something? Let us know in the comments section below

 

 

-WINSALA Gbotemi.

-Staff Writer, Eagle Global Markets.

 

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