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

Summary

• 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.

Strengthen your Portfolio with Kalkine LITE; Now Available at $19.99 Only

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   | Megapixl.com

READ MORE: Joblessness in Australia down to pre-pandemic levels

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  | Megapixl.com

READ MORE: Why Do Markets Not React Much To GDP Data?

Advantages

• 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.

READ MORE: COVID-19 effect: Healthcare takes over retail as biggest employer for Aussies