The term "blue chip" comes from the game of poker, where blue chips have the highest value. Shares of blue chip companies are considered to be of very good quality.
You must always hear about blue chip stocks in the stock market. Which means you hardly know. In fact, blue chip stocks are the stocks of those big companies, whose presence also affects the country's economy. The products and services of these companies are considered the best in the market. Whose credibility is very strong in the stock market and other open markets. Companies whose management is much better than other companies. By the way, the term "blue chip" originated from the game of poker, where blue chips have the highest value. Shares of blue chip companies are considered to be of very good quality. Let us also tell you what are the 10 benefits of investing in blue chip stocks.
Stability
Generally, such stocks tend to withstand economic downturns better than other stocks in the industry and economy and remain stable.
Reliable investment option
Because of which such stocks are considered more safe and reliable investment option than the stocks of mid and small size companies.
Listed in major indexes
Major and big companies of the country are listed in the major indices of the stock market like Sensex and Nifty. You will find the names of such companies in Sensex 30 and Nifty 100. These companies include Reliance Industries, TCS, HDFC Bank and HUL. Currently, these stocks form the backbone of major index and mutual fund portfolios.
Leading companies are of their sector
A distinctive feature of blue-chip stocks is their status as leaders of their respective sectors. These companies are known for providing the best product or service in their industry and their market shareholding is also higher than other companies. Because of which these companies are in the form of strong brand identity among the customers.
Bargaining power
Bluechip stock companies have more bargaining power than other companies. The reason for this is the monopoly of the company in the concerned sector. For this reason, they deal with companies with strength. Because of which the revenue of such companies increases.
Financial strength
The financial strength of such companies is generally strong with low debt, low working capital, healthy balance sheet and adequate cash reserves. This financial stability helps them to do R&D, capital expenditure, strong marketing.
Able to withstand market fluctuations
Given the prudent historical performance, investors can freely invest in such stocks even during adverse market scenarios. They usually withstand market fluctuations better than other companies during market volatility. In fact, they often emerge stronger during periods of market turmoil or economic downturns.
Consistent track record
An important aspect of blue-chip stocks is their consistent track record of paying substantial and regular dividends, providing a reliable source of income to shareholders. This stability in dividend payout further adds to the attractiveness of these stocks for investors.
Low risk investment
Generally, blue-chip companies are placed in the low-risk investment category. Risk is the main factor that stops people from investing in the stock market. Blue chip stocks are especially attractive to those concerned about market volatility. Due to the innumerable number of investors, their demand and supply is always high.
Lack of volatility in blue chip stocks
Blue chips companies are less volatile as compared to the broader market. Due to ample amount of liquidity, the investor is able to buy and sell at any point of time, thereby reducing the transaction cost drastically due to the low difference between the ask and bid rates.
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