What Are Blue Chip Stocks? - The Safest Way To Invest

The name "blue chip" comes from the game of poker, where blue chips have the highest value
Blue chips stocks are the shares of financially sound companies
Blue chips are companies with high market capitalization, usually, in billions
There are several advantages and disadvantages associated with blue chips

Blue Chip Stocks Explained - Large Company Shares

Blue chip stocks Definition: Blue chip stocks are the shares of financially sound companies what are blue chip stocks

In the stock trading market, blue chip stocks are the shares of financially sound companies that have a great reputation around the world. In most cases, blue chips are companies that are large, well-established, and household names that have operated for many years and have dependable earnings. In most cases, these companies are known for paying higher dividends to investors. These companies in most cases have a very high market capitalization, in most cases, in billions. They also tend to be market leaders in the sector they represent and are well-known around the world. These shares are also known to be very popular among investors. Some of the best-known blue chip stocks in the market are Coca-Cola, Boeing, and many others like this. While investing in blue chip stocks might be a great idea for some, there are other traders who prefer to avoid these types of stocks. There are several reasons why this happens. In this guide to blue chip stocks trading, we will discover both views to help you understand if blue chip stocks are a good option for you or not.

Why Blue Chip Stocks Are A Bad Idea

While there are many blue chip stocks to buy now available in the market, there still are some investors who decide to avoid investing in blue chips. There are several reasons for it. The main reason, however, is that these types of stocks are the ones that have already grown to what they could and they have already fulfilled their full potential. Although these companies are likely to continue the growth, it is expected to be at a slower pace. Because of this, if you are a trader who wants to make huge profits, and you want to do so in a shorter time and with a lower initial deposit, it might not be a good fit for you. If you are looking for large returns, you will have to invest lots of capital in blue chip stocks. This can get quite risky, which is one of the main reasons why some decide to avoid blue chips. In most cases, the growth for these companies tends to be only around 2-5 percent on a yearly basis. Such a little growth is not that much when you are investing in the stock market, and for some, it simply is not worth it. However, although there are disadvantages, it does not mean that you should avoid investing in such stocks at all costs. Although there are these disadvantages, there still are many reasons why people decide to invest in the best blue chip stocks.

Why Blue Chip Stocks Are A Good Idea

While some try to avoid blue chip investing, there are many others who believe that investing in blue chip stocks is a good idea. The main reason why so many people choose these stocks for investment is that they mostly tend to be simply too big to fail. Mostly, no matter what happens to the economy, which might cause numerous other stocks to drop, blue chip stocks might not receive the same damage. Even if they fall, they are the ones to recover first The main reason for the popularity of this type of stock is the safety and security that it offers to traders. However, this is not all. Although it might not be a requirement for a stock to be classified as a blue chip stock, they mostly tend to pay higher dividends. High dividend blue chip stocks are very popular among investors around the world. The dividend paid by companies tends to be a great advantage for investors as it acts as an additional source of income for investors. These companies are known to have solid balance sheets, steady cash flows, proven business models, and a history of increasing dividends. Because of this, there are many traders who consider blue chip stocks to be among the most secure investments due to their track records and performance history.

How To Choose The Best Blue Chip Stock To Trade

There are numerous things that you should keep in mind before you choose which blue chip stock to invest in. The first thing to do is to know what blue chip stocks are and how they really work. In addition to this, you should also consider fundamentals, current prices vs historical prices, upcoming changes, and many others. All of these things together can help you make well-informed decisions. Among the most important things that traders should keep in mind while choosing the best blue chip stock for investment are fundamentals, current prices compared to the historical data, possible upcoming changes, and several others. By keeping these important factors in mind, you should be able to easily find a blue chip stock that is worth your time and energy.

The Fundamentals

We have already defined the meaning of blue chip stocks, but what do you do to find the best blue chip stocks to invest in? One of the things that can help you find the best blue chip stock is to do fundamental analysis. While doing so, you should make sure that everything about the finances and economics of the company is in check. Although these companies are very likely to be successful in terms of performance, it is still very important to check out everything you can before you invest. Once you see that the company has a successful performance and its current situation is good, you can continue by investing in the stocks.

Current Price vs Historical

A very important thing that you will have to do is to decide when you want to invest. But how do you know that the market conditions are favorable for your positions? A very useful thing to do is to compare the current price of the stock to the historical price. Although regarded as mostly stable, the prices of blue chip stocks do fluctuate. However, these stocks tend to be extremely predictable and most investors know exactly when and how much the price will fall or grow. By understanding this, you will be able to enter your positions when the stock is down, rather than when it’s high up. You can do so by comparing the current price to the average of the last 1-2 years. You can also use charts to see how the price of the stock is changing and moving. This way, you can be sure that you are investing at the right time.

Upcoming Changes

When discussing blue chip stocks to watch you have to make sure that you are up to date with the possible upcoming changes. The changes in the company can have a huge influence on the price performance of the stocks. For example, to better explain this, let’s discuss one of the blue chip stocks, Apple. Apple is a huge company, the shares of which are owned and traded by numerous people every day. The company is known for frequently unveiling new products. Whenever the company releases a new product, the value of the company increases. Because of this, if you see that there is an anticipated addition to the list of