Blue Chip Stocks

What is a Blue Chip Stock?
 

The term "blue chip" refers to the stocks of leading companies in the US economy.  These stocks are financially sound, have high brand name recognition, and are consistent performers.  Blue chips are typically aged companies who have stood the test of time and have established a large footprint throughout the ecomony.  They typically weather economic recessions with the least amount of damage and consistently pay out dividends to their shareholders.  The term "blue chip" is derived from poker, where the blue chip holds the highest value

The Dow Jones Industrial Average & the Nifty Fifty Index are two best indicators of health of blue chip stocks as they predominately hold these companies.  GE, Coca Cola, Dupont, IBM, and Microsoft are all good examples of blue chip growth stocks.

Buying Blue Chip Stocks

There are a few ways to gain exposure to the blue chip sector.  One way is to individually purchase these shares with a broker; however, not all will want to get in the game of stock picking.  For these investors, they can look to purchase the DJIA tracking ETF (DIA) which track the performance of the Dow Jones Industrial Average.  Additionally, there are many mutual funds that are available to investors which will accomplish similar results.  The Fidelity Blue Chip Growth Index (FBGRX), Blue Chip Investor Fund (BCIFX), T. Rowe Price Equity Income Fund (PRFDX), Neuberger Berman (NPRTX), and Sound Shore Fund (SSHFX) come to mind as blue chip trading vehicles.  Be careful in looking through the fund prospectus and make sure the fund has a low expense ratio (below 1%) and has a fund manager with at least 5 to 10 years of experience.