9 Reasons Why You Need Blue Chip Stocks in Your Portfolio - Story

Blue chips' excellent performance and track records over time make blue-chip stocks some of the most secured investments. They should form a part of your diversified portfolio to help balance the possible losses in market downturns.

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.

They are known for strong financials, steady dividends, and cash flow – characteristics that long-term investors are looking for. The benefits of having blue-chip stocks as part of your portfolio include steady dividend payout, dividend growth, lower volatility, and predictable growth trend.

Seasoned investors consider them to be relatively safer than other stocks. Hence, they will make a valuable addition to your portfolio, especially in times of market uncertainties. However, it’s vital that you pick the right blue-chip stocks as not all of them will meet the required expectations.

Why You Should Have Blue-chip Stocks in Your Portfolio

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

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.

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.

Brand Recognition Blue-chip stocks are popular, recognizable brand names. This means you can get regular updates on the companies’ progress through mainstream media. You’ll be on top of your stock investments without putting in the extra effort to monitor the markets.