When you start investing in stocks, some financial advisors and individuals who have become investors before you will usually suggest buying blue chip stocks first. This way, they say, will allow you to ‘learn by doing’ or to understand how the stock market system works. But, what is actually a blue chip stock?
Read this article for details!
What is a blue chip stock?
According to Investopedia, blue chip stocks are huge companies with excellent reputations. These are typically large, well-established and financially sound companies.
The aforementioned factors made the investors think that blue chip stocks can survive stock market challenges, therefore they would recommend you to invest in blue chip stocks. In the majority of cases, this is actually true. However, this does not mean that you just need to invest in blue chip stocks. Keep in mind that a diversified portfolio is a must!
Characteristics of blue chip stocks
Still according to Investopedia, a blue chip stock typically has a market capitalization in the billions, is generally the market leader or among the top three companies in its sector, and is more often than not a household name. Beside these, blue chip stocks also have other characteristics, such as:
- Having reliable business model,
- Having an excellent track record,
- Have been operating for years and have good income,
- Frequently paying dividend to their shareholders, and
- Having constant growth rate dividends from time to time.
So what companies are considered blue chip stocks in the global stock market? Here are some of them:
Apple is one of the biggest companies in the world who successfully made a lot of innovation in the technology sector. What’s more, Apple products have successfully attracted a great number of loyal customers. The company with issuer code AAPL at NASDAQ, just made history with its US$3 trillion market capitalization on January 3rd earlier this year! You can read more facts about Apple here.
You must be familiar with this brand. The reason is, Coca-Cola has been the market leader in the beverage industry sector for more than a century. Although there was a decline in its popularity last year, this brand has successfully met the change in market demand by inventing preferable beverage products.
Based on The Motley Fool, Coca-Cola is a buy in stock market for its habit of increasing its dividend through the years.
3. Johnson & Johnson
Similar to the other two companies mentioned above, Johnson & Johnson (J&J) has long been recognized as the manufacturer of baby shampoo, soap, and knick knacks. However, this giant company with issuer code JNJ at NYSE does not only manufacture and sell baby stuff. Beside that, J&J also makes medical devices to improve doctors and other medical personnel’s performance. By November 2023, J&J is expected to split into two companies: one to focus on consumer health products and another to focus on pharmaceuticals and medical devices.
So, do you understand now what a blue chip stock is? The three aforementioned companies are just a few examples of blue chip stocks from the wide global market. If you want to know more, Mastercard, Walmart, Microsoft, Caterpillar, Starbucks, and many more, are also companies with blue chip status.
You can buy those stocks through Nanovest. Just download the application on Play Store or App Store, register your account, and you can invest in blue chip stocks available in the global market. Let’s become a global stock investor!