If you have ever heard the term blue chip stocks, then you might be wondering what they are and how they originated. The truth is that these stocks are referred to as the stocks that stand the test of time and endure all! So, it’s really important that you understand these stocks are getting publicly traded on the New York Stock Exchange, and that is why I wanted to share with you more about what they are and how they work.

What Are Blue Chip Stocks?

To answer the questions of what blue chip stocks are, let me just say that these stocks are notable. This means that these stocks are noted for their reputation, both good and bad, and that they are reliable. The most popular index for blue chip stocks is the Dow Jones Industrial average, and it is with watching this that you can easily find out what the winners are.

While there are roughly 30 stocks that are considered blue chip stocks, you should also know that the Dow Jones Industrial Average has been the measuring stick for these stocks since October 1, 1928.

The Origin of Blue Chip Stocks

While the name “blue chip” may be related to poker, this doesn’t have any bearing on what determines that stocks are blue chip stocks. Those companies, who wish to be considered as having ownership in blue chip stocks, must have market capitalization in excess of $5 billion dollars. Financial strength is obviously one of the characteristics but you should also know that these companies are expected to show a record on growth with profit.

These companies should also be well established, so they have a proven track record which makes sense. This is much like the same case that is being driven home regarding applying for a loan these days. The more stable someone’s financial history the more likely they are to be an ideal candidate for buying a home. Are you familiar with dividend payments? If so, then you can count this in too, because the ability to make these isn’t required, but it’s considered.

Blue Chip Stocks are Less Risky

Did you know that Blue Chip stocks are much less risky than other stocks? This is why many people choose to buy into them. These stocks usually follow the S&P in terms of pricing, or at least not far behind. The great thing is that these stocks are truly a good investment simply because they are backed by a long term history.

The reason these stocks are less risky, is because the companies that hold the stocks usually sell a viable product, and the product is something that is useful for many people not just a select group. Even in the face of adversity these stocks do well, and if you don’t believe it, then just invest in one and see!

Because they are less risky you don’t have much to lose, so be sure that you understand what you are getting into before you sign up for any "blue chip stocks".

Have an empowering day!

Blessings,

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