BLUECHIPS - A SAFE CAVE!
Blue Chip stocks are stocks of companies that are the pillars of an economy. These companies have a large market capitalisation, stable earnings history, leaders in their domain, and promising growth prospects. Think of blue chip stocks as an exclusive club of stocks where only those stocks are permitted who are market leaders in their domains.
While there is no specific definition of Blue Chip stocks, here are some points to define them: Characteristics that define them :-
- Large Companies:-The first way to identify a blue-chip stock is by looking at its market capitalisation. These are usually larger to very-large-cap stocks that are stock market giants in their sectors.
- Market leaders – Blue Chip stocks are leaders of the market in their industry. Some of the best blue-chip stocks in India are Reliance, HDFC, HUL, Infosys, TCS etc.
- Steady Earnings History – It is important to remember that blue-chip Valuation of the companycompanies take decades before they establish themselves as market leaders. Hence, they have a long history of stable earnings.
- Promising Growth Prospects – There are many types of companies in the market. While some companies manage to grow fast due to favourable market conditions, once they reach their peak, the growth prospects look bleak. However, blue-chip companies have promising growth prospects making them excellent investment options.
How to identify Bluechip Stocks?
Bluechips are a good set of stocks but identifying the best out of them is more important, so how do you do that?
Allow the pointers mentioned below:-
- Market Capitalisation
- Income of the company
- ROE - Return of Equity
- Valuation of the company
Why is it a safe cave?
A blue-chip stock is usually come with benefits including consistent dividends, predictable growth trajectory, and lower volatility. These are considered relatively safer than other stocks.However, you can benefit from them provided you choose the right ones.
Ensure that you focus on the valuation of the stock/company and avoid overvalued stocks. Also, align these investments with your investment plan.Remember, these stocks are not usually fast-growing. Also, they carry the risks associated with other stocks. Hence, it is important to choose them wisely. While these are a few suggestions that should help you invest, your conviction is more important. Research and analyse thoroughly.