Most blue chip stocks pay reasonable dividends; this is even when the company is performing worse than usual. The stocks of multibillion-dollar turnover companies like Microsoft, P&G etc are among the top blue chip stocks. They are relatively safe as compared to other options of investment.
Why to invest in blue chip stocks?
There are plenty of reasons why investing in blue chip stocks is a good option, they are:
1. Proved track record: The companies will have a proven track record. Even when the industry trends are slipping down, they suffer very little. These companies must have gone through same issues earlier and will have a clear idea on how to tackle these situations.
2. Diversity: These companies have diversified interests and will not focus on only one sector or product. Due to this they suffer less when one sector slows down because the other sectors which are performing better will make up for the losses.
3. Stable growth: These companies will have stabilized growth as opposed to new companies. New companies can profit in one quarter then have losses in the next, their growth is uneven. The blue chip stocks can easily give a return of 15% compounded per year without fail.
4. Best long term bets: Top blue chips stocks can be the best bets for long-term investments. They provide great results over the long term. These companies will have a proper foundation and after a period of time there will be only one way to go i.e. UP. Keep them as your first option when you plan to invest over long term.
The main question here is how to recognize a blue chip stock?
Four ways to identify a blue chip stock:
1. Strong balance sheet:
These companies will have very strong balance sheets. Moderate to low debts will be seen along with a history of consistent dividends.
2. Strong order book:
These companies are characterized by strong order books consisting of billions of dollars. Strong order books will indicate that the growth of the company will not come to a halt at any point. The company will keep growing without fail and that is very important for an investor.
3. Market cap:
The market cap of blue chip stocks will be among the highest in the stock market. When the market cap of a particular stock is billions of dollars then, it must be a top blue chip stock.
4. Diversified interests:
These companies will have diversified interests and will not focus on one particular sector or interest. If a stock shows these characteristics then it can be termed as a blue chip stock.
Well I hope this article gave you enough information about blue chip stocks. Use this information to find the best blue chip stocks to invest in and let the money roll in. Blue chip stocks can turn out to be your personal money-minting machine.
