Planning to invest in blue-chip stocks? Here are few things to know

June 01, 2021 04:45 PM AEST | By Ashish
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  • Blue-chip stocks belong to companies that have large market capitalisation.
  • These stocks are generally considered safe since they have a stable financial record and credibility.
  • These companies are also known to disburse attractive dividends.

Blue-chip stocks belong to companies that are stable and well-recognised and have significant market capitalisation. These highly priced market stocks are generally considered safe since they have a sound financial record and credibility.

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In addition, these companies are also known to disburse attractive dividends. These are a few reasons why these stocks are popular with investors. However, before investing in blue-chip stocks, investors must know about some key details.

Source: ©Webking   |

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From where did blue-chip stocks derive their name?

The term ‘blue-chip’ was first used to describe high-priced stocks in 1923. In poker game, the blue chips having more value than both red and white chips.

Key features of blue-chip stocks

  • Most blue-chip stocks provide regular dividends to their investors. So, these stocks are a source of steady and safe returns.
  • Due to strong financial backing, these stocks enjoy high creditworthiness.
  • They have lesser risks associated with them.
  • These are good for long-term investments.
  • These stocks observe steady growth over time.

Reasons for investing in blue-chips

  • They offer high and regular returns.
  • Investment in such stocks helps in better corpus building.
  • These stocks facilitate diversification of portfolio.
  • Blue-chip stocks are known to cushion the impact of inflation, recession, and economic slowdown.

Source: ©  Ptlee  |

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  • Blue-chips stocks are known to give regular dividends to investors.
  • These stocks are ideal for meeting long-term financial goals.
  • Their high creditworthiness makes them an attractive investment option. It makes these stocks relatively more liquid than other investment options.

Despite all the advantages, blue-chip stocks are still prone to volatility. So, investors must adequately do their homework before investing in them.

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