What are Blue Chip Stocks, Their Advantages and Disadvantages

Blue chip stocks are stocks of companies, which have a great reputation. Nowadays, many people are starting to understand the importance of investing, and are saving up for stocks in droves. However, not all stocks can provide benefits.

Blue chip stocks themselves are generally shares of companies that are already large, financially stable, and have sufficient income. Because of this shared advantage, blue chip stocks have become popular stocks to invest in. 

Some of the blue chip stocks are IBM, Coca-Cola, BCA, Boeing, and others. Then, what makes a company's stock called a blue chip? Check out the following reviews, OK?

Criteria for Companies with Blue Chip Stocks

Blue chip companies have proven that their stock performance is relatively stable, whether it's tough or not. Blue chip stocks generally have several general criteria, such as:

• Large market capitalization. Market capitalization is the value of the company. Blue-chip stocks are often large cap stocks, which usually means they have a market valuation of $10 billion, or more.
• Solid development over time, unlike technology stocks which tend to grow too fast.
• Blue-chip stocks are included in major market indexes such as the S&P 500, S&P 100, or Nasdaq 100.
• There are dividends. Companies that pay dividends are usually well-established, which means they no longer need to invest a lot of their earnings into their growth.

Pros of Blue Chip Stocks

There are several advantages if you choose blue chip stocks as your investment destination. Those advantages are:

• Stability. Because blue chip companies have been operating for a very long time. Smaller, or newer, companies tend to be less resilient to recessions or market changes.
• Dividend. As noted earlier, many blue chip stocks pay dividends, so you can have a steady income.
• Minimum effort. Because blue chip stocks are not as volatile as other securities, they do not require as much monitoring.

Shortage of Blue Chip Stocks

Even though there are many advantages that you can get from this stock, there are also disadvantages that you need to pay attention to.

• Blue chip companies are established companies, so their stock prices tend to be high. However, you can buy a small portion of the stock through a broker.
• You may not expect big profits, in the short term. You will get stable company growth, but little profit and it takes a long time.

Each stock has its own advantages and disadvantages. If you want to invest in stocks, you need to pay attention to the advantages, advantages, and compatibility with your plans, okay!