What are blue-chip stocks and their characteristics ?
A blue-chip stock belongs to a well-established and financially sound company which has operated for many years. Market capitalizations of such stocks are in billions and are the leaders of market or among the top companies in its respective sector. These stocks have good record of growth and are known for paying dividends to their shareholders consistently. A blue-chip stock is usually the component of the benchmark indexes of NSE and BSE. Some of these stocks are Infosys, TCS, SBI, Coal India.Trading in these stocks is done similarly like others and all executed orders will be reflected in demat account of traders and investors.To be on the safer side and earn desired returns experts suggestions on stock tips can be considered .
There is no particular criteria on the basis of which a stock qualifies to be a blue chip stock. Generally a perception is formed that these are safe mode of investment as they are having good market reputation and survived through various market cycles . However these factors does not make blue-chips stocks safer then others . There are various good performing companies who have been bankrupt and shareholders have lost their capital. Therefore traders must devote time and study companies performance before concluding its stocks are blue chip or not.
Following are some of the characteristics of blue chip companies
These companies are large and old with good reputation.
They have shown consistent growth rate from past years and has survived during economic down turns.
Great management and belong to the leaders of their industry .
They have diversified global operations and their earning are predictable.
Blue chip stocks are considered to be good from long term investment as they tend to offer consistent returns. They should be a part of your portfolio but not your entire capital should be invested in them. A portfolio should be well diversified according to investors risk tolerance capability with different large , mid and small cap companies .
Few blue chips companies of India are : Sun Pharma, CRISIL , ITC Limited, ICICI Bank Limited , Reliance Industries Limited. The stocks of blue-chips companies are relatively more expensive. Therefore investors should not blindly invest in such stocks. Company’s performance , how it is likely to perform in future, margin of safety all such parameters should be carefully analyzed. As these stocks are expensive along with this a brokerage amount has to be paid. Traders should pick brokers who charge them less . Discount broker can be a good choice as they charge low and no unnecessary restrictions are imposed by them. There are financial analysts who give recommendations on trading tips, mcx tips which they suggest after performing good research work. Traders can use such experts suggestions to improve their performance in the market.