What is a Blue-Chip Stock & How Do You Get There?

McDonald’s. Coca-Cola. American Express. IBM.

What do these companies have in common?

Aside from being industry-leading multinationals, they’re all considered blue-chip. It’s a term many of us are familiar with, but have you ever wondered where it first originated?

 

Why blue-chip?

First of all, why blue? Why not white, or red? And why chip?

Well, the term actually derives from the world of high-stakes poker. Poker chips have different colours, which represent a particular value. White chips are the least valuable, then there’s the red chips, while the blue chips indicate the highest value at the table.

Back in the world of investment, blue-chip has come to represent a company which is well-run, reliable, and able to operate profitably during both the good times, and the bad. 

 

What is a blue-chip stock?

A blue-chip company’s stock is also considered ‘blue-chip’ in the investment world. The stock is viewed as a top performer in its sector, and is usually part of major stock market averages and indexes, such as the Dow Jones. The market capitalization (total dollar market value of a company’s outstanding shares) of a blue-chip company is typically in the billions.

 

How does a company gain blue-chip status?

While there are no hard and fast rules when it comes to presenting a company with blue-chip status, the company in question will often be:

  • Near or at the top of its sector;
  • A well-known brand;
  • Or featured on a recognised index, such as the S&P 500 or the FTSE 100.

Another broad indicator of blue-chip status is the company’s ability to weather an economic downturn. McDonald’s, for example, may not feel the pinch of a recession in quite the same way as a smaller, less recognisable restaurant chain.

 

What’s the benefit of investing in a blue-chip company?

For many investors, the benefit of investing in a blue-chip company comes down to stability. These companies are intelligently managed with strong business models, and offer security, even during periods of slowed growth.

Blue-chips are considered solid long-term investments with the potential to grow steadily over time, while also paying out dividends to shareholders. It’s little wonder Warren Buffett has so many in his portfolio!

 

See for Yourself

Add Coca-Cola, IBM, or McDonald’s to your Invstr fantasy portfolio and see for yourself how a blue-chip stock performs over time.

Download Invstr today from Google Play and the Apple App Store.

 

Share:

More Posts

Load More
Get your daily Invstr Crunch

Get the market news and updates you need, delivered to your inbox or available on our daily podcast.

Facebook Twitter Youtube Instagram Snapchat Tiktok
learn
products
plan
Who we are
blog

Risk Disclosure:

Invstr is not a bank and banking services are provided by Vast Bank, N.A.

Brokerage and Banking services are currently only available to U.S. residents.

Invstr app and web services are provided by Invstr Ltd. Advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC) details of which can be obtained here. Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value.

Investing involves risk and can lead to losses. Past performance does not guarantee future results.

Invstr app and web services are provided by Invstr Ltd. Invstr+ advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC). Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value. Vast Bank N.A. a nationally chartered bank and member of the FDIC, provides the banking products, including the products and services related to digital asset accounts. As with any asset, the value of Digital assets can go up or down and there can be a substantial risk that you lose money buying or holding digital assets. You should carefully consider whether trading or holding Digital assets is suitable for you in light of your financial condition. Your digital account does not support wallet to wallet transferring of your digital assets (i.e. cryptocurrencies) outside the platform. Any Digital Assets in your digital asset account are not insured by any government entities, including but not limited to FDIC or SIPC. The Invstr Visa® Debit Card is issued by Vast Bank, N.A. pursuant to a license from Visa U.S.A Inc and may be used everywhere Visa debit cards are accepted. Invstr Ltd, Invstr Financial LLC and Invstr Securities Ltd are subsidiaries of Marketspringpad Holdings (collectively “Invstr”) and Invstr is solely responsible for the application services and website content.

Watchlists provided when users first access the service are not a recommendation to invest. Instead they are provided to help users better navigate the service. Users are free to edit and create their own watchlists. From time to time, Invstr will suggest instruments solely based on an individual’s interest and the interest levels of the Invstr community.The statistical and portfolio builder models generated by Invstr do not reflect actual investment results and are not guarantees of future results.Comments provided by Invstr leaders, influencers or members of the Invstr Community are not recommendations and should not be construed as such.Invstr does not endorse the content or the positions posted by them. Their investment approach, and that of the models provided by Invstr, may be different from yours and may not be appropriate for you.