Blue chip stocks are assets issued by the leading international companies and organizations with a flawless reputation and excellent performance over decades. As a rule, blue chip stocks refer to some of the biggest companies that are well-established and long-running in addition to stable financial health. They appear to be the number 1 choice for the majority of investors hunting down stable dividends to be paid off in the long run.
Generally, these stocks are issued by the top three enterprises that are leaders in a specific niche. For example, some of the most well-known blue chip stock companies include Coca-Cola, IBM, Boeing, and others. In this article, we will discuss how safe blue-chip stocks are and how they may help to keep your portfolio diversified.
What Is Blue Chip Stock and How Does It Work?
Although the majority of investors look for blue chip stock to generate long-running dividends, it is not the only crucial factor that makes an asset a blue chip. The term was borrowed from poker terminology (where the blue color is considered the most expensive), although investing has nothing in common with gambling.
These types of shares appear to be a part of the most trusted market averages or indices (for example, S&P 500, TSX-60, FTSE, and some more). Experts still argue on how a company can obtain the blue-chip status. Some consider a market capitalization that is supposed to exceed $5 billion. Others say that companies of any size may refer to the group of the most reputable organizations. There are no specific requirements or guidelines. In other words, both huge and mid-enterprises should be taken into account as potentially profitable ways to invest funds.