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
- 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.