What Is Blue Chip Stock?

What Is Blue Chip Stock?

2023-03-28 • Updated

What Is a Blue Chip?

The term “blue-chip stock” came to investing from poker, where the blue chips have the highest value. Thus, blue-chip stocks are used to describe well-known, high-quality companies that are leaders in their industries. These stocks tend to show strong growth over their history and typically pay dividends.

Blue Chip Stock Characteristics

Let’s define what the main features of blue-chip stocks are.

1. Large market cap

Market capitalization is a gauge that reveals the size and value of a company. Blue-chip stocks are generally large-cap, meaning their market valuation equals $5 billion (generally accepted benchmark) or more.

2. Stable growth

Blue-chip stocks stood the test of time. They have a history of robust growth, a stable earnings foundation, and a bright future. Blue chips can rise not as quickly as fast-growing tech stocks because they have already developed their business and it’s almost impossible to support the growth at a rapid pace all the time.

3. Market index’s component

Blue-chip stocks are components of the main market indexes like the S&P 500 (US500), the Dow Jones Industrial Average (US30), and/or the Nasdaq 100 (US100).

4. Dividends

It’s worth mentioning that not every blue-chip stock pays dividends, but most of them do. Dividends are payments companies make to their investors regularly. Firms that pay dividends are often viewed as mature as they don’t need to invest as much revenue into their growth and can allow themselves to remunerate shareholders.

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Major Advantages of Investing in Blue-Chip Stocks


Blue-chip stock can become the core holdings of your investment portfolio. Remember though that a well-balanced portfolio should consist of different groups of stocks. Diversification is the most universal recommendation for stock investors. The idea is not to put all the eggs in one basket – to collect a set of various stocks that will react differently during the same economic events. The goal is to minimize the risks of unexpected price movements of one asset.


Another reason why blue chips are so popular among investors is their reliability. Blue chips aren’t resistant to market crashes, but they have demonstrated a history of overcoming the difficulties of many kinds and reversing back.

The Safety of Blue-Chip Stocks

First, let’s define what safety means for investors. For some people, it means that stocks don’t lose as much value as other groups of stocks during a market downturn. For others, safe stocks are those that don’t cut or suspend their dividend payments even during an economic crisis. Blue-chip stocks have both these advantages, that’s why they are perceived as safe investments.

Best blue-chip stock to buy

Even if you are a newbie in investing, you are already familiar with the names of many top blue-chip stocks. Why? The goods and services produced by these companies are an integral part of our everyday life. Here is the list of the best blue-chip stocks.

1. Apple

Apple is one of the world’s biggest companies and also a leader in the tech sector. Just remember a range of its devices from innovative Macintosh computers in the 1980s and the iPod in 2001 to its omnipresent iPhones, iPads, and Apple Watches these days. Apple has created an incredible ecosystem: once a customer is inside, it won’t get out with a high probability.


2. Berkshire Hathaway

Berkshire Hathaway, which CEO is famous Warren Buffett, is a main player in the insurance industry. The company offers different commercial and personal insurance through its subsidiaries. This company has gained a reputation as a market-beating and stable company.

3. Coca-Cola

Coca-Cola has been a frontrunner in the beverage segment for many years. Now, this giant has a wide range of products from sports drinks to bottled water and soft drinks. Growing dividends since the early 1960s make Coca-Cola even better in the eyes of investors.


4. Johnson & Johnson

Johnson & Johnson has been well known for its consumer goods, but in 2021 it has also become an approved vaccine-maker against COVID-19!

5. Walt Disney

Walt Disney has an eventful history starting from the animation industry and theme parks to its Disney+ streaming service. The company has been hit hard by the Covid-19 crisis as its shops, parks, and cruises were shut due to the social-distancing restrictions. Now, Disney is likely to recover as restrictions were eased amid the vaccination.


How to trade blue-chip stocks?

  1. Download the FBS Trader app on your mobile phone to be always able to check the charts and MetaTrader 5 on your personal computer for more complicated tech analysis.
  2. Make technical and fundamental analyses with the help of our articles and videos.
  3. Open a position and monitor it!


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