How to Invest in Blue-Chip Stocks
UPDATED: March 2022
How to Invest in Blue-Chip Stocks - If you're thinking of expanding your investment portfolio when the market shows volatility, your best bet would be to invest in blue-chip stocks. These are stocks from blue-chip companies, i.e., stable and renowned companies in the US that have been around for a long time. Due to their size and the relatively lesser risk of investing, most investors prefer to invest in blue-chip stocks during times of market turmoil.
How to Invest in Blue-Chip Stocks
The coronavirus pandemic has negatively affected the stock market, which means blue-chip stocks are popular among investors now. So, if you're thinking about investing, it would be in your best interests to consider investing in blue-chip stocks. Before we get to that, here is everything you should know about them.
What Are Blue-Chip Stocks?
There's no exclusive definition of a blue-chip stock, as they are generally stocks of a company that meets specific criteria from investors. When people refer to a company as blue-chip, they do so because the company has displayed the following characteristics:
* Substantial Market Cap
When you look at blue-chip stocks, you realize that most of them are giants of the stock market, primarily due to their market capitalization. Stocks with large market caps are generally stocks with more than $10 billion of market capitalization, and some may even have a $200 billion market cap.
* History of Stable Earnings
Blue-chip companies aren't businesses that have a good track record for a couple of years. Blue-chip companies have stable earnings history, an extensive track record of years, and decades of great earnings before they qualify for a blue-chip ranking.
* Excellent Growth Prospects
To qualify as a blue-chip company, there must be a solid plan for the organization's future growth. In general, blue-chip stocks have excellent growth prospects and a great earnings record. The company's growth rate may decline at some point, but the company will continue growing.
* Market Leaders in Blue-Chip Stocks
Massive conglomerates that have been around in the industry are the most popular blue-chip stocks because they have the finances and track record to withstand market downturns. Most blue-chip companies are listed on the S&P 500.
Why Invest in Blue-Chip Stocks?
Most exchange-traded funds and mutual funds have blue-chip stocks in their portfolio, and if you have a 401(k) plan from work, you could be the owner of a blue-chip stock without even knowing about it. Blue-chip stocks are a great investment option because they will always be a safe bet regardless of market conditions. That's because blue-chip companies aren't affected as severely as other companies when the economy is experiencing a downturn.
Therefore, if you have invested in blue-chip stocks, you can rely on them to provide you with stable returns on your investment for the long run.
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