Blue chip stock is a nick name given to stocks that are deemed safe. The name “blue chip” originated from the game poker where the highest chip denomination is blue in color. Sometimes, they are referred to as “Bellwether Issues”. Blue chip stocks are high quality stocks and are excellent investments. Stocks that are considered blue chip are issued by large corporations like General Electric and IBM. Some other companies are, Walmart, Coco-Cola, Gillette, and Exxon-Mobile.
Some people might consider these stocks to be somewhat outdated, because mainly retirees and non-profit foundations will purchase. The fact is, there are several benefits to be derived from investing in these blue chip stocks. The earning are stable over many years, and the holders enjoy uninterrupted dividend payments when compared to other stock holders. In addition, they carry high credit ratings in bond and commodity markets. Moreover, these stocks can compete in the market place due to franchise and distribution control.
Because of their make-up or characteristics, blue chip companies like Walmart and Coco-Cola carry a leadership position in the market place. Due to their excellent credit ratings, they are able to secure loans at much lower rates than competitors. These corporations that issue these stocks have great reputation. They are the back-bone of the community. And, consumers have confidence and trust in the products and services they carry. As a result, most times, consumers will not hesitate to purchase their products, even if they carry a little higher price.
The Dow Jones Industrial Average (Dow) is best known world wide for listing blue chip stocks. They are thirty (30) in number and the only requirement needed to be listed is leadership in the industry. The Dow Jones Industrial has been in operation since the 1800’s and carries a high reputation in the world for stability of stocks. Many companies follow and use the daily reports as a fair indicator and gauge on what steps to take, whether to expand business or remain as is.
For those who have patience and a few dollars to invest, blue chip stocks are the perfect pick. They carry small risks and are stable. Blue chip stocks are not for the individual who wishes to make a “kill” overnight. They are for those who do not mind to see the steady growth of their investments over a period of time. One can acquire these stocks through a broker, a direct stock purchasing plan or a dividend re-investment plan.
Today’s financial market is steadily coming out of a recession. This was partly due to careless and unstable investments in certain companies. Thankfully, some economists say the economy has reached the bottom. Blue chip stocks would be the ideal stocks to purchase during this economic climate.