The term Blue Chip originally stems from casinos and poker, where the blue chips always have the highest value. In the stock market, the term is used for the absolute largest, safest, and most established companies in the world.
"What you rest in, will rest in you."
— Florence Scovel Shinn
For investors who want to rest well at night without worrying about bankruptcy, Blue Chip stocks are the natural choice. These are companies that have proven their right to exist over decades, survived financial crises, and are often dominant in their industry.
Characteristics of a Blue Chip
Slowly but surely: A Blue Chip stock will rarely double in value in one week. They are large oil tankers that take a long time to turn, but they deliver steady, predictable returns and dividends year after year.
Why own them?
- They provide great stability to your portfolio and act as a shock absorber when the market is volatile.
- They have enormous capital and strong brand recognition, making it almost impossible for new competitors to crush them.
- Most dividend investors build their portfolios almost entirely around Blue Chips.