What is Blue Chip Company in India?

Have you ever thought – what does it take to make a top notch business? But, before that – here’s the meaning of it if you didn’t know. A blue chip company is one that is well known, well established and financially strong. Blue chips are companies that sell high-quality, well-known goods and services. Blue chip companies are known to weather economic downturns and perform financially in the face of adversity. Here it contributes to their long experience of constant and sustainable growth.

What is the meaning of Bluechip?

The name “blue chip” comes from the game of high stakes poker. Poker gambling chips have different dollar values ​​depending on their color. White tokens are often the least valuable, with each token only worth $1. Next are the red chips, which are normally worth $5 each. The chip with the highest value on the table is represented by the color blue.

As a result, this word was borrowed from the poker world and applied to stock market parlance.

What is a Bluechip company?

A blue chip company is well known, well established and well capitalized in the investment world. Such a company is considered a market leader in its industry, producing dominant goods or services. Because of their consistent revenue and steady growth over time, blue chip companies are generally better positioned to survive economic downturns. Rather than being known only to investors or aficionados, they are often household names.

Should you invest in Bluechip stocks?

For investors, this question would be a recurring one. Whether you’re considering investing in India’s biggest IT stocks or consumer staples, the answer to that question is right here.

Each type of investment depends on the investment objectives, time horizon and risk tolerance of the investor. If you’re a stock investor, however, blue chip stocks are a good place to start. First, they are the safest stocks, which is beneficial if you want consistent returns. Second, you can invest some of your money in blue chip stocks in a diversified portfolio with others to protect against market turbulence. While other mid-cap or small-cap stocks may underperform or remain flat, large-cap stocks may perform or remain flat.

Consider These Attributes Before You Can Invest In A Bluechip Business

Besides what is mentioned above, you need to consider the following factors before you can take another step in investing in Bluechip companies:

  • Adding blue-chip stocks to your other assets can help diversify your portfolio and mitigate the effects of recessions and economic stagnation.
  • It will help you build your corpus and can also help you deal with inflation as you build your wealth over time.
  • Blue chip companies are very expensive. Thus, they may not be suitable for modest investors.
  • Blue chip companies are large capitalization companies that have almost reached their maximum growth potential. So they grow slowly. They are reliable and provide predictable results, despite their modest growth. So if you are looking for a safe investment, blue chip stocks are a good option.
  • As they do not rise or fall quickly, they are suitable for new investors or those with a modest risk profile. They remain consistent; therefore, invest in blue chip stocks if you want consistent returns with low risk.
  • Bluechip stocks can offer greater long-term returns because they grow gradually, making them ideal for investors with long investment horizons. You should plan to invest for 7-10 years.

Investments from Bluechip companies in India can benefit you far more than you imagine, but here are five amazing reasons why they should be your investment choice.

Why invest in Bluechip companies?

Here are the top reasons why you need to invest in blue chip companies:

  1. You will benefit from dividends – If a business succeeds year after year, it will have consistent profits to distribute to owners, employees, investors and other stakeholders. It simply indicates that investors have placed their trust in the company. This is a very positive sign, as the company’s foundations are solid.

As a result, it is obvious that if a stock has steady earnings, it is backed by a strong management team that is doing something right to keep the company’s growth on a steady track. The first and greatest expectation of any investment is to earn high profits on your investment portfolio.

  1. There is the aspect of strong finances – When a company is top notch, it has strong finances to back it up. This implies that the company’s debt ratio is excellent, its financial ratios are good and its operating cycle is efficient, among others. From an investor’s perspective, owning such blue chip companies simply means less downside risk, less volatility, and the ability to manage the risk portfolio. Blue chip stocks are preferred over mediocre stocks for the following reasons.

Blue chip stocks are slightly more expensive, but they give you the most bang for your buck.

  1. Solid reputation and goodwill will do you good – Top-notch companies have a high reputation and goodwill with the general public. These companies will have a competitive advantage over newly created companies or over incompetent competitors. Blue chip companies grow as market leaders due to profitability, goodwill, quick accessibility to franchisees, and distribution control.

Nestlé, McDonald’s, Coca-Cola, Unilever, Reliance Petroleum, Shell and Infosys are among the blue chip companies. These companies are also on the Fortune 500 list.

Bluechip shares are considered safe investment options because they are less volatile and can withstand economic downturns. They also have moderate but delayed development potential. These are generally dividend-paying stocks that are paid quarterly. When investing in individual stocks, it is best to diversify your portfolio to avoid company risk.

Conclusion

These are the companies with the strongest balance sheets and proven business models. If you are someone who is looking for all of these in a company to invest in, then Bluechip would be the right choice.

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