Blue Chip Stocks: Good investment Yes or No?

Blue Chip Stocks: Good investment Yes or No?

Blue Chip Stocks: Good investment Yes or No?

In this article we will talk about the most famous stocks of all “Blue Chip Stocks”. These are the ones everyone has heard about and some of the most popular to buy.

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  • Blue Chip stocks are those that make up the most important stock indices, such as the S&P 500, Dow Jones, NASDAQ, FTZE MIB. 
  • The name Blue Chip derives from one of the most famous games in the world, namely poker. The blue colored chips are the ones with the highest value. Therefore, the Blue Chip shares are those that represent the stocks of the most capitalized companies, leaders in the sectors to which they belong.
  • Blue Chip shares are the ones that most of all constitute a strong attraction for many investors. In fact, they are the ones that most of all seem solid, and resilient even to periods of economic recession. However, they are not immune to stock market crashes or bankruptcy.
  • The most popular Blue Chip stocks include: Coca Cola, John & Johnson, Microsoft, Apple…..
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Ready to find out all about Blue Chips? Well, read on!

What are Blue Chips and which are the most important?

You have often heard this term, and wondered what kind of stocks are in this specific class.

Today we will explain where this term comes from, which are the most important Blue Chip stocks and the advantages, disadvantages of investing in this area.

Many investors are convinced that it is necessary to have a portfolio consisting only of this type of shares, because they are the safest and most reliable. But is it really so?

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Blue Chip meaning: Definition of Blue Chip Stocks

The name Blue Chip derives from one of the most famous games in the world, namely poker . If you are a fan, you will surely know that the blue colored chips are the ones that have  the highest value .

Therefore, the shares belonging to this “class” are those that represent the most important companies in their sector. However, there are no precise criteria for being part of it.

However, to be classified as a Blue Chip, companies must have two characteristics in particular :

  1. Your market capitalization must be at  least 10 billion .
  2. The company  must be among the leading companies in its  reference sector.

Therefore, it is not enough to be listed in the most important indices, or to have only a high capitalization. To be considered a Blue Chip, a company must also demonstrate that it is a healthy company, already established in the market.Blue Chip stocks are those that make up the most important stock indices, such as the S&P500, Dow Jones, NASDAQ, FTZE MIB.

Why invest in Blue Chips

Blue Chip shares are the ones that most of all constitute a strong attraction for many investors. In fact, they are the ones that most of all seem solid, and resilient even in times of economic recession. 

When one sector is in trouble, there is often another that compensates. So, if your wallet is made up of different types of Blue Chips, they will often maintain fairly constant earnings.

In addition, this share class sp it pays regular dividends , and over a fairly long period.

Therefore, having a good number of Blue Chip stocks can be ideal for investors who pursue the following goals:

  • Round up the  future pension : that is, for those who intend to raise a certain amount of money to ensure a more substantial pension, and a more peaceful life.
  • Obtain constant but minor profits:  that is, for those with a risk averse personality, who wants to obtain reduced profits, but constant over time.
  • Fighting inflation : these stocks grow over time, and thanks to constant dividends they can increase the value of the portfolio itself.
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The Disadvantages of Blue Chip Stocks

Blue Chip stocks are those that usually manage to overcome economic crises . However,  they are not immune to stock market crashes or bankruptcy.

For example, in 2008 the company Lehman Brothers , a very important holding belonging to the Blue Chip shares, went bankrupt. 

Therefore, there are no safe investments .

Furthermore, these are actions that are subject to a  lot of media attention . Therefore, market rumors can negatively affect the price trend even with negative news of little relevance.

In addition, Blue Chips  are not suitable for investors with a risk-prone personality . In fact, with low volatility it is unlikely to make profits with short-term trades.

Therefore, it is not possible to take advantage of the daily price movements with these shares, i.e. to operate with intraday trading.

There is currently no precise list of companies that are part of this class of particular stocks.

Nevertheless, below we will list the most famous ones, which for a long time have played a decisive role among the Blue Chip titles.

  • Coca Cola shares : the American giant has been issuing regular dividends for more than 50 years.
  • Johnson & Johnson shares : a very important leading company in the pharmaceutical sector and beyond.
  • Microsoft Equities : A leader in the IT industry and founded by Bill Gates, one of the richest men in the world.
  • Apple Shares : Leading technology company with revenues exceeding $ 200 billion annually.
  • McDonald's shares : founded after the war, a leader in the food sector and famous throughout the world.
  • Berkshire Hathaway Shares : one of the largest holding companies in the world, founded and led by one of the most prolific investors in history, Warren Buffett.
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Investing for Beginners: FAQ

How should a beginner start investing?

A beginner should start investing by first setting clear financial goals. Are you saving for retirement, a down payment on a house, or your child's education? Once you have a goal, you need to understand your risk tolerance. This will help you determine the right mix of investments. Next, open an investment account. This could be a retirement account like a 401(k) or an IRA, a taxable brokerage account, or a robo-advisor account. Once you've funded your account, you can start picking your investments. It's generally recommended to start with a diversified portfolio, which could include a mix of stocks, bonds, and mutual funds.

Is $100 enough to start investing?

Yes, $100 is enough to start investing. Many online brokers and investing apps have no minimum investment requirement, or if they do, it's very low. You can invest in individual stocks, ETFs, or mutual funds. Another option is to use a robo-advisor, which will create a diversified portfolio for you based on your risk tolerance and investment goals.

How to invest $100 dollars to make $1,000?

Turning $100 into $1,000 through investing requires time and patience. One of the best strategies is to invest in a diversified portfolio of stocks and bonds and let compound interest do the work. If you invest $100 in a portfolio that earns an average annual return of 7%, it would take approximately 30 years for your investment to grow to $1,000. However, keep in mind that investing involves risk, and the actual return could be higher or lower.

How do I start investing with little money?

Starting to invest with little money is easier than ever thanks to technology. Many online brokers and investing apps allow you to start investing with as little as $1. You can buy fractional shares of stocks and ETFs, which means you can own a piece of a company or fund without having to buy a whole share. Another option is to use a robo-advisor, which will create a diversified portfolio for you based on your risk tolerance and investment goals. Finally, consider setting up automatic contributions to your investment account. Even a small amount each month can add up over time.

Risk Disclaimer

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