What Are Bluechip Stocks? Meaning, Benefits & How to Invest

The concept of Bluechip Stocks originated in 1923 Oliver Gingold who worked at Dowjones coined the term bluechip stocks to refer to the stocks trading at $200 and above on this stock market. So bluechip stocks are publicly listed securities of leading companies with the largest market capitalisation. These are quality stocks worth a lot and are usually added to top market indexes like the S&P 500, NASDAQ, etc. You will often see that investors invest in such stocks to mitigate risk and get portfolio stability.

Now that you know what bluechip stocks are let's look at some characteristics 

1. Large Cap Stocks 

These companies have high market capitalisation by the way the market cap is calculated by multiplying the stock price by the total number of stocks of the company

2. Low Risk

When a company becomes that big they have to run it properly making it safe for investors to own stocks of such companies, These bluechip companies are safer to invest in than midcap and smallcap stocks. But there is always the risk of losing money in the stock price falls.

So don't blindly invest in bluechip stocks thinking the stock price only goes up.

3. Stable Growth 

There's often a limit on how big a company can get or once they reach the top quickly the growth usually slows down. So Compared to midcap or smallcap stocks these stocks won't increase in value quickly and will rather have stable growth.

4. Long Term Perspective 

If you want to make money quickly bluechip stocks aren't for you since these stocks have relatively low risk and stable returns, it would make sense to invest in such stocks only with a long term view.

5. Dividend Payout 

Most bluechip stocks pay shareholders dividends, which can be a good regular income stream for investors.

Companies are not obligated to pay dividends in any way, though it all depends on the management team.

Investing in Bluechip Stocks 

Bluechip stocks are often called rock solid securities. These stocks stabilize during inflation, recession, depression and other economic downturns. But, returns are in no way guaranteed to investors. It's just that these stocks are relatively less risky than other midcap, smallcap or penny stocks. These bluechip companies have decent balance sheets. Cash flow, business models and growth rates. This makes it attractive for longterm investors with a relatively low risk appetite. Along with the appreciation in the value of the stock. investors can get returns in the form of dividends too. So, overall it is recommended that bluechip stocks make up a large part of one's portfolio.

Disclaimer : Each post is meant to provide information. Opinions are personal. Before investing, study yourself in detail and seek the help of a financial advisor if necessary. The risk is yours alone.