Do You Know What a Blue Chip Stock Is?

Have you heard the term, “blue chip stocks” and didn’t know what that meant? One of my readers says yes to this query. She wrote to me and mentioned that she had heard this term more than her years but didn’t recognize what it was or why it was important. Many men and women never know what this implies or more importantly, why it is critical.

Does not it always seem to be that way? We hear all of these various terms when we are attempting to do the right items with our cash but it would take a great deal of perform to know all of the Wall St. terms. Blue chip stocks are what are deemed to be the very best of the finest in high quality. They are the name brand stocks. If you desired a blue chip shoe, you may by a snazzy looking pair of Nike. If you needed to buy a blue chip Television, you may well buy a Sony.

How do you spot a blue chip stock? The easiest way (although not very this simple) is to the search at the Dow Jones Industrial Average.

What you will locate when you search at the Dow Jones are 30 stocks, most fitting what we are looking for if we want a portfolio of blue chip stocks. In fact, the Dow Jones is typically referred to as the blue chip index so you can really feel pretty great about discovering blue chip stocks in this index.

Be warned, though. Just since it really is a member of this elite group of 30 stocks, that does not imply it’s the greatest of the finest. General Motors was a member of the Dow Jones until eventually the day it went bankrupt. Make positive you do your analysis. Never take somebody else’s word for it.

What are we looking for in these stocks? Very first, they have a great seeking balance sheet. Much more assets than liabilities. If, at your house, you spend far more cash than you make and your credit card balance is going up quicker than a hot air balloon, your balance sheet is not very good. (several households are in this position) If your property had been a stock, you wouldn’t be a blue chip stock. Preserve in thoughts that analyzing the balance sheet of a organization is a small far more complex than this easy illustration.

Subsequent, it pays a dividend. When you place dollars in to a cost savings account at your nearby bank, they pay you a dividend. In this situation, your dividend is interest. Finally, these stocks normally move at nearly the same rate as the S&ampP 500. This is a collection of 500 stocks that is largely followed as a image of how the market place is performing. When a stock moves in the identical direction and rate as the S&ampP 500, it is a quite safe stock.

Now, why is it essential to know about these stocks? If you’re somebody who doesn’t have a great deal of time to tend to your investments, you want protected investments in established businesses. If you believe the several who say that owning a stock in which you happen to be trying to lock in shorter term gains, if will take one hour of study per week per stock. That is a great deal of work for somebody with a full time task outside of the investment sector. Blue chip stocks can be left alone (for the most element) for a couple of many years with out a huge amount of research.

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