As a new entrant in the realm of stock markets, it is easy to be overwhelmed by the jargons, charts and stock market noise. What if I said that you could get a piece of company that has been around for decades and never really falters to deliver? Well, this is the magic of blue-chip stocks, which are like the VIPs in the stock markets. Let’s understand the importance of purchasing blue-chip stocks as a beginner, which are reliable, trustworthy and an extremely smart choice.
What are blue-chip stocks?
Blue-chip stocks refer to the stocks of those large, established and stable companies which have a rich history of delivering consistent performance. Everyone has heard of the big names in the markets that have a high valuation and have been around for years. These companies dominate the stock markets and have a proven track record of success.
Now are you thinking what makes these stocks so appealing? Even during economic downturns, these stocks are extremely reliable and resilient as they have the complete ability of bouncing back. In layman’s language, these stocks are less risky and can give you good returns than those small and weak companies.
What is the need for beginners to indulge in these stocks?
Stock market feels like a wild roller coaster ride when you are just starting your journey. What would you need in during such a time? A stock that can help in making your ride smooth. Blue-chip stocks have the ability to make sure that your beginning is smooth and less risky.
These stocks are known for their reliability and belong to companies that are time-tested. From economic downturns to changing market scenarios, these stocks have been able to stand steady. During recessions, these companies have been able to maintain their value. Beginners need peace of mind and this stability can actually give you what you need!
Blue-chip companies are known to reward their shareholders with regular cash payments or dividends. You can get paid just for owning the stocks of these companies. You can easily compound your returns over time as you can reallocate these dividends to buy more shares.
You get hands on a wealth of information regarding big businesses. All their reports, analyses and performance history are readily available and this makes it easier for the beginners to make informed decisions and not get lost in those technicalities.
With blue-chip stocks, you have a lower degree of volatility and their priced don’t swing wildly. As a beginner this is a huge advantage, as it will avoid you from resorting to unnecessary panic-selling during market downturns.
If you are building a solid portfolio, blue-chip stocks act as a foundation of sturdy bricks for you! Lay the groundwork for steady growth and explore more aggressive stocks later one with blue-chip stocks.
Choosing the right blue-chip stocks
Always make sure to pick stocks that are aligned with your goals, even in the case of blue-chip stocks. Let’s understand how you can choose the correct ones.
The first focus of yours should be on a company that has a solid earnings record and manageable debt levels. With a history of steady revenue growth, these companies have a strong backbone and can benefit you.
You must look for consistent track record of paying and increasing dividends if you are more inclined towards dividends. This is indicative of the company’s commitment towards its shareholders and a strong economic scenario.
Companies that dominate their sector are the perfect match for you! Even in tough times, these market rulers have the resources and expertise to maintain their position.
Are you putting all your assets in the same sector? This is a move that can easily backfire. Diversify your assets across different sectors and see the risks of getting a shock reduce by significant margins.
If you are thinking of quick gains, then blue-chip stocks are not for you. Go for these stocks only if you are here to play long-term. Patience is the key to your success in the stock markets and can help you build your wealth steadily over years.
How to build a solid portfolio with blue-chip stocks?
Let’s understand how to incorporate blue-chip stocks into your portfolio.
Start with stocks from industries you understand and select only a few stocks. Setting realistic targets is a major need and you must make sure that you understand that these stocks are not doubling your contribution overnight. If you want consistent and reliable growth then these stocks are perfect for you.
Another cool strategy that you can use is to reallocate your dividends to buy more shares. You can ensure an accelerated portfolio growth with a compounding effect using this strategy. You know what’s perfect about blue-chip stocks? These stocks are relatively low-maintenance. However, keep an eye on their performance and always review your portfolio.
Common myths debunked
It is a common myth that blue-chip stocks are very expensive. You must have heard it yourself, haven’t you? You can easily save a lot of costs by purchasing a fraction of a share of these stocks to ensure lower costs.
If you think that these stocks are boring, you need to re-think it. These stocks might not give you that adrenaline rush, but their steady growth and dividends are all you need in the end.
Even though these stocks do not skyrocket overnight, they provide stability and long-term returns which outpace volatile trades.
Role of these stocks during tough times
Blue-chip stocks shine during economic downturns and this is what you need as a beginner in stock markets. These stocks are known for their resilience and stability and therefore, these stocks play an important role during tough times.
If you are new to the world of trading, blue-chip stocks can easily ensure a better life for you! The portfolio of a beginner is never complete without a blue-chip stock, which is both resilient and reliable at the same time. These stocks can save you during crisis situations, when others might face severe problems. So, which blue-chip stock are you trading in today?
