WHAT'S A BLUE CHIP STOCK?

The term “blue chip stocks” refer to prestigious, well-established companies.

Characteristics of blue chip companies:

• Good record of earnings over a long period of time

• Good record of dividend payments to investors

• Strong financial position; with not much debt in their books
  

• Large in size relative to the market

• Leaders in their field or industry
  

• Relatively stable, solid companies

FAST FACTS

• The term 'blue chip' probably originated from the game of poker, where the chips with the highest value are the blue ones.
  
• Probably the most well-known list of blue chip companies is the Dow Jones Industrial Average, a collection of thirty stocks is selected by the editors of the Wall Street Journal.

Examples of blue chip stocks:

In America: Wal-Mart, Coca-Cola, Berkshire Hathaway.

In Singapore: SingTel, Singapore Airlines, Singapore Press Holdings.

Why invest in blue chip stocks?

Blue chip stocks, because of their stability in terms of growth and dividend payment, are excellent as long-term investments, providing you with relatively stable, secure returns on your investment.