What are the Blue Chip Stocks and Why Should You Invest in Them?

Why it is called blue-chip

While paying a dividend to be a blue-chip share is not entirely necessary,  the companies which are considered  blue-chip  companies   they are often required to pay a long record of stabilizing or increasing dividends. It is believed that this word has been taken from poker where the blue chips are the most expensive pots.

Blue-chip stocks are typically a component of the prestigious market index such as Sensex and Nifty.

Safe in investment

While the blue-chip company remains up to a certain extent with many challenges and market fluctuations and hence is considered as a safe investment, it can not always be same. During the period of changes in the market, the best companies may also have to face the situation.

Investors' choice

Blue chips have a strong balance sheet and cash flows, strong business models and continuous growth. Many investors consider blue-chip stocks as a safe investment. Long-term investors keep their investments in blue-chip stocks faster and overtime to receive dividend payments.

Stability

Most investors know that there can be steady earnings from blue-chip stocks. During the economic downturn, investors can invest in these because of their safe nature. Blue-chip companies provide security during their slow management due to their intelligent management teams and the ability to generate stable returns. If the stock market faces a downturn, investors do not have to worry about their investments in blue chips as they usually get recovered soon.

Share in portfolio

The share of blue-chip stocks is suitable for use in the form of core holdings in a portfolio, but generally, they should not be complete portfolios. A diversified portfolio usually needs to be shared with all types of shares. An investor should also have mid-caps and small-caps in portfolio shares.and also follow stock tips, Young investors should also keep the stocks that can bear the risk in their portfolio with blue chips.