Why should you invest in blue chip companies?

Blue chip companies are those which are nationally recognized and are listed on major stock exchanges of the country. They are financially sound and most are large-cap companies. They have a solid balance sheet and high return on equity in long run.

blue chip company

They sell high-quality products which are used in almost all household or offices or industries. For information of blue-chip companies you can contact the stock advisory company.

Even during market corrections, their shares have a little adverse effect. And they are able to recover from it at a faster time. They have a long record of stable and reliable growth because of the very strong management team.

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Having said that, we will discuss the reasons why should one invest their hard earned money in blue-chip companies.

  1. Strong financial background

If a company is blue chip one, then it is backed by strong financial conditions. That is, its debt to equity ratio is near perfect, has an efficient operating cycle, and has a free cash flow. The shares prices are less volatile and have minimum downside risk. They have the ability to reduce the risk portfolio in a better manner. Though their share price may be little expensive and they provide complete value for your money’s worth.

  1. Diversifying your portfolio

Diversifying your investment portfolio in blue-chip companies of different sectors/industries will be more beneficial and will actually make great sense. Because of the excellent operational efficiencies, even investing in risky blue chip stocks, you can minimize your losses. There are blue chip companies in agri sector you can get commodities tips regarding it.

Since blue-chip companies businesses are mostly spread over a large geographical area and have other sources of generating income too, hence it diminishes the chances of the investor making a loss.

  1. Earning regular dividends

Because of the high quality of products, and virtually monopoly of the business, blue-chip companies perform well year after year. They generate stable revenues, which is distributed among employees, shareholders and other stakeholders. That is, an investor earns stable dividends over a long period of time. This way they earn the trust of the investors.

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  1. Dividend and capital appreciation

Blue chip companies pay timely and consistent dividends. This is possible because of their income increases in line with capital appreciation. A shareholder earns consistent dividends from blue-chip companies. The dividend is extra money over and above the value of the investment. The price of shares of blue-chip companies increases over a period of time.

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  1. Goodwill and brand

Since blue chip company manufacture quality product, they have a good reputation, goodwill and have a brand image. Blue chip companies are mostly market leaders in their segments, because they have cost-efficient production, have good sales and distribution network, and products are available easily in the market.

If investors go in for blue chip company they know that their investment is in safe hands. They will get the regular dividend. It is observed that those investors, who wish to stay invested for a very long period of time, usually prefer investing in blue-chip companies. nifty future tips

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Their shares are also very liquid because they are highly traded by individuals and institution alike. That is if the investor, at any point in time needs cash he can sell his shares without waiting, as there is always a ready buyer at the other end.

Some Indian blue-chip companies are Tata Consultancy Services, Bharti Airtel Ltd., ITC, Coal India, HDFC Bank, Tata Motors, L&T, NTPC Ltd., Hindalco Industries Ltd., Axis Bank, Mahindra and Mahindra etc.

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