Blue chip stocks are the ivy league of investment stocks. They are shares of companies known for steady cash flow, solid balance sheets, reliable business structure, and excellent performance history.
Blue-chip stocks are shares of long-standing companies that are well established, big, financially stable, leaders in their sector, and well-known. Like blue-chips in poker games, from which the name is derived, blue-chip companies are highly valued.
Your primary concern as a dividend investor is the safety of your dividends. That is, you continue to steadily receive your share of the company’s earnings.
Historically, blue-chip stocks have performed better than the general stock market, which averages 8% to 10% return. Blue-chip stocks can return up to 12% when you ideally reinvest your dividends.
Blue-chip stocks tend to be safe harbor stocks. They are less volatile than penny stocks and smaller companies’ stocks and are also likely to rebound faster after a market downturn.
Blue-chip stocks are some of the most liquid investments in the world. You can trade them at a moment’s notice and through various brokers, fund managers, or online platforms.