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Blue chip stocks can offer steady returns even in volatile markets. You can find blue chip stocks across various sectors including technology, banking and oil.
Blue chip stocks are stocks of well-established companies with reliable track records. They’re considered valuable and capable of thriving in both strong and weak economies. While there’s no standard definition for blue chip stocks, they tend to share certain characteristics.
There’s no official list of blue chip stocks, but the Dow Jones Industrial Average, which lists 30 companies, is a good place to start. These are often regarded as some of the most valuable and reliable heavyweight companies in the country. However, many others listed on the New York Stock Exchange or the NASDAQ would also qualify as blue chips. They’re all companies with a history of providing steady returns and minimal volatility to investors, and they’re spread across a range of market sectors.
The FAANG tech stocks have earned a reputation for driving much of the success of the big bull run throughout the 2010s; FAANG stands for:
Other top blue chip tech stocks include:
Companies in the financial sector make up a portion of the blue chip classification. These companies tend to have a history of providing large dividends and include the major banks and credit card companies, including:
The products and brands that many Americans across generations have grown up knowing sustained growth and success, including:
As drilling and mining is a cyclical industry, natural resource companies have the potential to provide high capital growth. But these can have a reputation for underperforming when the mining industry experiences a downturn. Having said that, companies that have diversified businesses firmly established across the nation include:
Retailers tend to offer medium-sized dividends to shareholders, and are popular choices among investors. Also, popular restaurant chains have loyal followings that provide consistent profits. Blue chip stocks in this sector include:
For instant diversification, you can buy a basket of blue chip stocks in a single transaction through an index fund or exchange-traded fund (ETF). Here are some popular examples.
Many successful long-term investors like Warren Buffett have advocated for investing in companies that you believe will be around for a generation or two. The kind of stocks that tend to fit that description are the blue chips that continue to show steady returns. This may translate to consistently higher stock prices and consistent dividend payouts.
It’s a versatile combination that allows you to either reinvest those dividends and compound the earnings over time or take the dividends as a stream of passive income. On top of that, holding investments for the long term also has some significant tax advantages.
As for intangible benefits, investing in a company you can rely on for the long haul takes away much of the anxiety or worry an investor feels about a volatile stock market.
It depends on your investment goals. Blue chips tend to be long-term investments or ongoing income streams of dividends. While many blue chip stocks can be safe investments, their value doesn’t usually rise much over a short time unless you can scoop them up at a discount during a downturn.
Investing in potentially riskier businesses, or small caps, may earn you higher returns with a faster turnaround. When you invest in a small company, you’re betting that it will become the next big thing and multiply your investment as it quickly grows and scales up its revenues.
Dividends are most commonly paid quarterly, though some companies pay them twice a year, annually or irregularly.
There’s a class of blue chips known as the dividend aristocrats that have not only consistently paid dividends, but often rose the percentage dividend payouts. To meet the ranks, companies must deliver at least 25 consecutive years of dividend hikes. As of December 2020, the dividend aristocrats include 3M, Coca-Cola and Colgate-Polamlive.
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Investing in the stock market is never risk-free, but blue chip stocks are historically less volatile. If you’re interested in buying stocks, compare investing platforms to find one with fees and minimums that match your investing goals.
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