1. Summary
  2. Definition
  3. Importance of Blue chip
  4. Understanding a Blue-Chip Stock
  5. The Safety of Blue-Chip Stocks
  6. Blue Chips as a part of a bigger Portfolio
  7. Conclusion


A blue-chip stock could be a Brobdingnagian company with a superb name. These are usually giant, well-established, and financially sound corporations that have operated for several years and have dependable earnings, usually paying dividends to investors. A blue-chip stock usually contains a capitalization within the billions, is mostly the market leader or among the highest 3 corporations in its sector, and is additional usually than not a house name. For all of those reasons, blue-chip stocks are among the foremost standard to shop for among investors. Some samples of blue-chip stocks are IBM house., Coca-Cola Co., and Boeing Co.


 Blue-chip stocks are shares of terribly giant and well-recognized corporations with an extended history of sound monetary performance. These stocks are familiar with their capabilities to endure robust market conditions and provide high returns in sensible market conditions. Blue-chip stocks usually value high, as they need sensible names and are usually market leaders in their several industries.

Importance of Blue chip

  • Blue chip stocks are huge corporations with glorious reputations, usually as well as a number of the largest house names.
  • Investors address blue-chip stocks as a result they need dependable finances and infrequently pay dividends.
  • There could be a perception among investors that blue chips will survive market challenges of the many kinds; whereas this might be for the most part true, it’s not a guarantee. For this reason, it’s crucial to diversify a portfolio on the far side of solely valuable stocks.

Understanding a Blue-Chip Stock

While dividend payments aren’t fully necessary for a stock to be thought-about a blue chip, most blue chips have long records of paying stable or rising dividends. The term is believed to own been derived from poker, wherever blue chips are the foremost pricey chips.

A blue-chip stock is mostly an element of the foremost respected market indexes or averages, like the Dow-Jones Industrial Average, the quality & Poor’s (S&P) five hundred, and also the Nasdaq-100 within US., the TSX-60 in North American nation, or the FTSE Index within the UK.

How massive a corporation has to be to qualify for blue-chip standing is receptive dialogue. A usually accepted benchmark could be a capitalization of $5 billion, though market or sector leaders are corporations of all sizes. The T. Rowe worth Blue-Chip Growth Fund does not have a selected guideline for what style of company qualifies outside of specializing in capitalization and mid-cap corporations that are well-established in their industries, though the median market cap of the fund’s holdings has traditionally been within the vary of about to $100 billion.

The Safety of Blue-Chip Stocks

While a blue-chip company could have survived many challenges and market cycles, resulting in it being perceived as a secure investment, this might not invariably be the case. The bankruptcies of General Motors and Lehman Brothers, moreover as a variety of leading European banks throughout the world recession of 2008, are proof that even the simplest corporations could struggle during times of maximum stress.

Blue Chips as a part of a bigger Portfolio

While blue-chip stocks are applicable to be used as core holdings at intervals in a bigger portfolio, they often should not be the complete portfolio. A distributed portfolio sometimes contains some allocation to bonds and money. at intervals of a portfolio’s allocation to stocks, capitalists ought to think about owning mid-caps and small-caps moreover. Younger investors will usually tolerate the chance that comes from having a bigger share of their portfolios in stocks, as well as blue chips, whereas older investors could focus more on capital preservation through larger investments in fetters and money.


A distributed portfolio would possibly embody the possession of a rash of value stocks, which means the stocks of enormous, well-capitalized, well-understood corporations, among a range of different holdings. additionally, by owning individual stocks, investors may additionally get to own valuable exposure through the acquisition of mutual funds or exchange-traded funds (ETFs).

A market participant should buy blue-chip stocks singly, or by shopping for mutual funds or exchange-traded funds (ETFs) that invest in value stocks. In some cases, funds and ETFs can hold a range of stocks and quality categories, as well as blue chips. In different cases, the funds or ETFs could be centered solely on blue chips, like ETF that tracks the Dow-Jones Industrial Average, which includes thirty of the most important blue-chip stocks.