Blue Chip Stock
A blue chip stock is a share of a large, well-established, financially sound company with a history of reliable performance, stable earnings, and often regular dividend payments.
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Blue chip = large, established, dividend-paying. Dow Jones has 30 blue chips.
What is a Blue Chip Stock?
Blue chip stocks are shares of large, reputable companies known for quality, reliability, and the ability to operate profitably in good and bad times. The term comes from poker, where blue chips have the highest value.
Characteristics of Blue Chips
| Characteristic | Description |
|---|---|
| Market Cap | Typically $10 billion+ |
| Track Record | Decades of successful operation |
| Financials | Strong balance sheets, consistent earnings |
| Dividends | Often pay regular dividends |
| Brand Recognition | Household names |
| Market Leaders | Dominant in their industries |
Examples of Blue Chip Stocks
- Apple (AAPL)
- Microsoft (MSFT)
- Johnson & Johnson (JNJ)
- Coca-Cola (KO)
- Procter & Gamble (PG)
- JPMorgan Chase (JPM)
Blue Chip Indices
| Index | Description |
|---|---|
| Dow Jones Industrial Average | 30 blue chip stocks |
| S&P 500 | 500 large-cap stocks |
| Nasdaq-100 | 100 largest non-financial Nasdaq stocks |
Pros and Cons
| Pros | Cons |
|---|---|
| Lower volatility | Less growth potential |
| Dividend income | May underperform in bull markets |
| Safer in downturns | Still can decline significantly |
| Highly liquid | May be overvalued |
Suitable For
- Conservative investors
- Income-focused portfolios
- Core holdings in diversified portfolios
- Retirement accounts
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