Blue-Chip Stocks Guide: Should You Buy in During a Market Downturn?

With that said, the term “blue-chip stocks” has stuck for a select group of stocks…. Investors also appreciate the dividends blue-chip stocks typically pay. Dividends are especially attractive if you’re investing for income, as many investors do in retirement. Blue-chip stocks tend to pay reliable, growing dividends. Many large-cap stocks are arguably not strong enough to be considered blue-chips.

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• However, just about every investor can benefit from having a portion of their portfolio invested in blue chip stocks.
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Balance SheetsA balance sheet is one of the financial statements of a company that presents the shareholders’ equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner’s capital equals the total assets of the company. DividendsDividends refer to the portion of business earnings paid to the shareholders as gratitude for investing in the company’s equity. Market CapitalizationMarket capitalization is the market value of a company’s outstanding shares. It is computed as the product of the total number of outstanding shares and the price of each share.

Popular Stocks

There are many great blue-chip stocks outside of this list too. But many international blue chip stocks have to be hunted down using your own search criteria. There are many good reasons to invest in blue-chip stocks, no matter what the market is doing. When stock markets are down, blue-chip stocks offer best shares for short term trading several advantages over smaller and less stable stocks. In the next section, we’ll explore when to invest in blue-chips. Keep in mind that these stocks fluctuate in value along with the rest of the market, and just because they are considered blue chips, does not mean they are immune from failure.

Diversification is a fundamental rule when setting up an investment portfolio. In other words, it’s important to spread out your investments across many types of stocks and bonds so your exposure to one single section of the market is limited. If it’s the latter, remember how difficult it is and how long it takes for large blue chip dividend stocks to shift their mix into profitable areas of growth.

The advantages of blue chip stocks

Investors with a high risk tolerance may choose to invest in small-cap or mid cap companies. The stocks of these companies provide the opportunity for outsized future growth. However, these securities also add the possibility for an outsized risk to the downside.

While a blue chip company’s utter failure may not be common, these stocks are still subject to price fluctuation. While the value of blue chip stocks tends to be stable, every linear trend estimation company has ups and downs, and no one is immune to market forces. Just like any stocks, shares can lose value, and dividend payments can fall if the company’s profits do.

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The traditional approach is to actually buy the stocks of blue-chip companies and own them over a long period of time. That’s what Warren Buffet, the most famous investor in the world, is doing. Blue-chip companies have a proven business model and have used their retained earnings to grow further. This makes it very difficult for other competitors to encroach on their market stocks. Below you can find examples of well-known blue-chip stocks. They aren’t necessarily the biggest or best blue chips but a cross-selection of examples from different industries.

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Trading blue-chip stocks

Blue chip stocks are seen as safer investments than other stocks because of their long histories. However, Facebook didn’t even exist until 2004, so it is not well-established enough to be a blue chip company. Facebook also reached a market capitalization of over $1.05 trillion by July 28, 2021, which means it is well-capitalized. A company must be well-known, well-established, and well-capitalized to be a blue chip.

• Revenue surged 38.4% to a company record $1.91 billion, which was in-line with analysts’ expectations.
• Intel currently pays a dividend of $0.37 which represents an annual dividend yield of 5.35%.
• Consistent dividend increases are often a sign of dependable profits and management’s confidence in the future of the business.
• While a blue chip company’s utter failure may not be common, these stocks are still subject to price fluctuation.
• They are often household names known to the general public, rather than just investors or enthusiasts.

Another way for investors to gain exposure to blue chip stocks is through an index fund that benchmarks the Dow Jones Industrial Average . Consistent performance, solid balance sheets, and the opportunity to collect dividends should be enough to convince you that blue chip stocks have a place in your portfolio. But if you’re still not convinced, here are a couple of additional reasons why vantage wealth management review 2021 blue chip stocks have a place in every portfolio. Click here to instantly download your free list of all blue chip stocks, along with important investing metrics. Index funds and ETFs track an index, which is a specific segment of the stock market. Since blue-chip stocks typically have large market caps, a large-cap index fund or ETF is a good way to get exposure to these companies.

Blue-chip stocks: Highly reliable stocks from well-established companies that can add strength and safety to any portfolio

As noted above, blue-chip stocks are generally, but not always, household names. Note that this list does not include every blue-chip stock; it is just intended to be a sample. No one type of stock should make up the bulk of your portfolio. Diversification, as always, is key when investing, even if you’re investing in companies that are widely considered rock-solid.

That’s a trait fewer than 50 companies typically possess, making blue chip stocks a select group that most companies strive to join one day. These high-growth upstarts aim to be the blue chip stocks of tomorrow. Members should be aware that investment markets have inherent risks, and past performance does not assure future results.

A blue chip is a nationally recognized, well-established, and financially sound company. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.

If you have ever wondered what blue chip dividend stocks are, why they are attractive, where you can find them, and what the best ones are, you have come to the right place. Blue chip dividend stocks can be some of the most appealing investment opportunities for income and capital appreciation. Investors seeking exposure to those companies considered most valuable often turn to indexes as a way to slice a piece of the blue-chip pie. Exchange-traded funds and index funds focus provide an entry point into blue-chip investing without the cost-prohibitive price. The blue-chip term came into financial parlance in the early 1920s.