Blue Chip Stocks: 9 Reasons Why You Need Them in Your Portfolio

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.

What are Blue-chip Stocks?

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.

Blue-chip companies have the following in common:

- Stability - Consistency - Competitive advantage - Benchmark Indices’ Components

Why You Should Have Blue-chip Stocks in Your Portfolio

1. Safe Dividends

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.

2. High Returns on Investment

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.

3. Safe Harbor Stocks

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.

4. Brand Recognition

Blue-chip stocks are popular, recognizable brand names. This means you can get regular updates on the companies’ progress through mainstream media.

5. Liquidity and Ease of Access

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.

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