Are blue chip stocks good for beginners?
Blue Chip companies are a good place to start if you want to establish a steady and diverse portfolio. They provide an attractive investment opportunity due to their history of market stability, dividends, and capital appreciation potential.
Blue chip stocks are usually less risky and thus considered safer than other stock-based investment options. That's because one of the major determining factors of a blue chip stock is that it must be a well-capitalized company, meaning it should have the financial fortitude to endure an inevitable economic downturn.
- Broadcom (AVGO).
- JPMorgan Chase (JPM).
- UnitedHealth (UNH).
- Comcast (CMCSA).
- Bristol-Myers Squibb Co. (BMY).
How do I invest in blue-chip stock? You can purchase blue-chip stocks through online brokerage firms or gain access to them through blue-chip funds. Given the high price-tag per share for some blue-chip stocks, some investors are opting to buy into these companies through fractional trading offerings.
Pros and Cons of Blue Chip Stocks
Lower returns than less established companies. Less room to grow, meaning that they are unlikely to see large gains. Expensive due to high demand.
Long-Term Prospects: Take a long-term approach to investing in Blue Chip stocks. These companies are best suited for investors with a five-year or longer time horizon. Monitoring on a regular basis: Keep a watch on your portfolio, assess company performance, and make any adjustments to your holdings.
Returns (%) as of 12/31/2023 | QTD | 1 YR |
---|---|---|
Blue Chip - Gross | 10.17 | 24.44 |
Blue Chip - Net | 9.76 | 22.59 |
Russell 1000® | 11.96 | 26.52 |
Returns for greater than one year are annualized |
“Ideally, you'll invest somewhere around 15%–25% of your post-tax income,” says Mark Henry, founder and CEO at Alloy Wealth Management. “If you need to start smaller and work your way up to that goal, that's fine. The important part is that you actually start.”
- Eli Lilly and Company (NYSE:LLY)
- Walmart Inc. ...
- The Procter & Gamble Company (NYSE:PG) ...
- Philip Morris International Inc. (NYSE:PM) ...
- NextEra Energy, Inc. (NYSE:NEE) ...
- PG&E Corporation (NYSE:PCG) Number of Hedge Fund Holders: 58. ...
- Vistra Corp. (NYSE:VST) ...
Stock | Market Capitalization | Sector |
---|---|---|
Colgate-Palmolive Co. (CL) | $73 billion | Consumer staples |
Sysco Corp. (SYY) | $41 billion | Consumer staples |
Coca-Cola Co. (KO) | $261 billion | Consumer staples |
S&P Global Inc. (SPGI) | $134 billion | Financials |
Is Costco a blue chip stock?
As a small example, Costco Wholesale (NASDAQ:COST) has trended higher by 226% (capital gains) in the last five years. This has led to this list of blue-chip stocks under $20.
What do IBM, Walmart, JPMorgan Chase, and DuPont have in common? Although they are in different sectors, they are all known as blue chip companies. Blue chip companies are the mature firms that represent the stalwarts of an industry.
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- Decide what you want your portfolio to achieve, and stick with it.
- Pick an industry that interests you, and explore the news and trends that drive it from day to day.
- Identify the company or companies that lead the industry and zero in on the numbers.
During economic slowdowns, investors turn to blue chip stocks to protect their investments. For example, during the financial crisis in the last decade, some blue chip companies survived the crisis and investors who held shares in these companies were able to recover their earnings.
Understanding a Blue Chip Stock
While dividend payments are not absolutely necessary for a stock to be considered a blue chip, most blue chips have long records of paying stable or growing dividends.
SNo | Top Blue Chip Stocks | Sector |
---|---|---|
1. | Reliance Industries Ltd. | Conglomerate |
2. | Tata Consultancy Services Ltd. | Information Technology |
3. | Infosys Ltd. | Information Technology |
4. | HCL Technologies Ltd. | Information Technology |
The Dow Index – popularly known as Wall Street's blue-chip index – has a new look since the beginning of trading on Feb 26. The restructuring of the 30-stock index resulted in the exit of medical-retailer Walgreens Boots Alliance and the entry of the e-commerce super giant Amazon.com Inc. AMZN.
The advantage of holding a stock forever is the uninterrupted growth of the stock's value over many decades. And if you buy a stock with the intention of holding it forever, you're naturally going to invest in a company you like.
The problem is that despite being included in blue chip ETF indexes, companies like Nvidia and Tesla aren't truly blue chip stocks, George Pearkes, an analyst at Bespoke, told CNN. They're much more volatile. Tesla, for example, is down about 23% so far this year.
- You've found something better. ...
- You made a mistake. ...
- The company's business outlook has changed. ...
- Tax reasons. ...
- Rebalancing your portfolio. ...
- Valuation no longer reflects business reality. ...
- You need the money. ...
- The stock has gone up.
Are blue chip stocks good for retirement?
And the real benefit to these stocks is that they pay a dividend which increases your total return. Over time, a strong total return is the key to building wealth. Here are seven high-yield blue-chip stocks to help you meet your retirement goals no matter where you are on your investment journey.
Because blue chip companies are relatively stable, blue chip stocks are considered a low-risk investment. In all likelihood, no matter what happens tomorrow, the most established companies in the banking or real estate sector would not collapse overnight, so investing in them is a relatively safe bet.
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.
Unfortunately, quality stocks trading for less than $10 are few and far between. Stocks priced at this level can be a red flag for investors that something serious is wrong with a company. Many of these stocks have challenged underlying business models or difficult near-term outlooks.