Investing in Blue Chip Stocks

These are basically companies who have had a proven track record. These are companies who have multi billion dollar turn over and are pretty famous like apple, Microsoft, P&G etc. The blue chip stocks are relatively safe for investment compared to the other options that you have.

Why should you invest in blue chip stocks?

There plenty of reasons why you should invest in blue chip stocks:

o Proven track record: These companies have a proven track record for centuries. They have high management bandwidth so even when the industry trends are on their way down these suffer very little because such companies have been through the same times before and know how to handle such situations.

o Stabilized Growth: These companies have a stabilized growth instead of some new ones which are in profit in one quarter and in loss the other. Due to which the stocks of these companies can easily give you an return of 15% compounded annually.

o Diversified: These companies are mostly not based on one product or one sector. They have widely diversified interests which helps the balance sheet in case a certain sector suffers a slag. Due to their diversification strategy they tend to suffer less during the slag periods because all the sectors are unlikely to slow down at the same time.

o Good long term bets: blue chips stocks are the best bets if you want to invest for the long term. These give great compounded results over the long term. These companies have a solid foundation and over a period of time have only one way to go that is upwards. Hence these should be your first choice when you have to invest for the long term.
How to classify a stock as a blue chip?

A blue chip stock can be identified based on the following parameters:

Strong balance sheet: These companies with strong balance sheets with moderate to low debt. They have consistent dividend paying history.

Market cap: The market cap of blue chip stocks is among the highest in the market. The market of blue chip companies is billions of dollars.
Diversified interests: These companies have diversified interests. They have vested interests in many sectors rather than one.

Strong order book: These companies have strong order books of billions of dollars and ever growing.

Strong order book indicates that their growth is not halted and the company is poised for a growth which is essential factor for an investor while investing in any company.

So now you know everything you need to invest in blue chip stocks, so go ahead and invest in the blue chip stocks to make a killer return.

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