Who Should Invest in Blue Chip Stocks? How To Invest?
Who Should Invest in Blue Chip Stocks?
Blue Chip Stocks refer to
shares of companies with large market capitalization (Blue chip Companies).
These companies are relatively less sensitive to market fluctuations compared
to Mid Cap and Small Cap companies.
The term ‘blue chip’ comes from the game of poker where the blue gambling chips holds the highest value on the table. Similarly, the Blue Chip companies represent those companies from each industry that are well-established, have stable earnings and have the highest market valuation.
Companies with large
market capitalization deliver consistent returns on investment, because of
their high endurance during turbulent market swings. When it’s a bullish
market, returns from equity investments in large cap companies are
better than companies with low market capitalization.
Blue Chip Stocks offer great opportunity for making high returns on investment. If an individual has a sound knowledge of financial markets and enough time to track the market, s/he should invest in blue chip shares to earn consistent returns. The suitable investment horizon for blue chip investment is 5-6 years.
The growth potential of Blue Chip companies is relatively less, as they’re already at the peak of their performance in their respective sectors. This is why investment in equities of these companies carries low-risk, together with low returns when compared to companies that have a high growth potential. If you have a high risk appetite, then you should consider investing in Mid- cap or small-cap companies.
Best Blue Chip Stocks in
India
According
to the market capitalization, there are multiple blue chip companies whose
stocks will generate good returns in the long run. Here is a list of top 10
blue chip stocks that are faring well in the stock market: With Market Capitalization & Share price :
1. Indian Tobacco Company
(ITC) Limited-
2. Hindustan Unilever Limited
(HUL)
3. Reliance Industries-
4. Tata Consultancy Services
(TCS)
5. Oil and Natural Gas
Corporation (ONGC)-
6. Housing Development Finance
Corporation (HDFC) :
7. Infosys Ltd. -
8. Eicher Motors Ltd. - Rs. 46,038.37 Cr- Rs. 16,875.30
9. Sun Pharmaceuticals
Industries Limited:
10. State Bank of India (SBI):
How to invest in Blue Chip
Stocks?
To invest in Blue Chip Stocks, one needs to have a demat account. Investors can either directly invest in a preferred stock, or invest via a broker. However, you need to pay a brokerage fee when you choose to invest through a broker.
What are Blue Chip Stocks?
A blue-chip stock is the stock, of typically, financially sound companies that have had a healthy operation for many years and have dependable earnings. These stocks also often pay a steady dividend to their investors. Some of them tend to be high dividend yield stocks. Generally, a blue-chip stock is a market leader in its sector or amongst the top three by market capitalization. All these factors make them very popular among investors.
Why is Blue chip stocks a good investment?
Any investor would want to stake a business that has demonstrated profitability over multiple generations. They may not be among the set of buzzing stocks all the time, however; over the long term, blue-chip stocks tend to make money for the shareholders. Therefore, these are a great investment for people who can hold on through thick and thin, and through market cycles.
Risk and return of blue-chip investment
Blue-chip investments are low risk, low return investment in the short-term. Therefore, blue-chip stocks should form the core of your portfolio, but should not be the only type of investment you make. You should also invest in a few mid- and small-cap stocks, based on your risk appetite. Blue-chip stocks are a favourite of retirees and rich investors, but most beginners tend to stay away from these. The reason is, low short-term returns are not attractive for investors looking to make money quickly, but the low risk associated with these is great for retirees for whom the safety of their capital is much more important. Similarly, long-term prospects are attractive to investor who may not need to withdraw the money in a hurry.
Safety of blue-chip stocks
Always remember that past record is not a guarantee of future performance. Even the best of the companies can struggle, and therefore you should diversify your investments to reduce the risk of losing all your money during a bad run.
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