What Is A Blue Chip Stock?

Blue Chips

A blue chip stock refers to a normal stock investment share; the term blue chip stock is more of a description, an adjective, than an actual type of stock.  Blue chips stocks are stock shares in a company that is most often very well-established.  These long-existing publicly traded stocks have two things in common:

A blue chip stock pays regular dividends to its share holders.  A dividend is a percentage of the company´s earnings paid out the investor depending on how much blue chip stock they own.

A blue chip stock has no extensive liabilities.  This means the blue chip company has significant holdings, meaning real money or other tangible and valued possessions, and little or no significant debt.

The Origin Of The Blue Chip Stock

The term blue chip was borrowed right out the gambling casinos.  In casino gambling a blue chip always represents a chip, the coin-shaped discs used in place of money for bets, of the highest value.  It is said that the term blue chip was put into use one day by Oliver Gingold, a Dow Jones company executive.  In the 1920´s it is rumored that Mr. Gingold was noticing trades on the stock market while on the floor of significant value, several hundred dollars each.  Big money for stock share prices in those days.  When seeing these stocks Mr. Gingold exclaimed ¨I must write about these blue chip stocks.¨ Whether the folklore is true or not regarding blue chips, the name persists: blue chip stocks mean well-performing publicly traded stocks in good solid companies.

What Blue Chip Investing Means

To the stock investor, blue chip investing means picking stocks in these good companies with near predictably stable profitable returns. A blue chip company will most often not be the company that gets you several hundred percent returns on your investment in a short amount of time.  Blue chip investing means long term goals, and long term steady profits.  Blue chip investing is very popular with investors who are looking to keep their money relatively safe in the stock market while making better money than bank savings account or CD´s might offer them.  Blue chip investing is also a standard part of most mutual funds.  Many mutual funds will keep a significant amount of their portfolios in the blue chips in order to have some balance and something to fall back on if their other more volatile stocks should take a loss.  Blue chip investing should be the starting point to invest in the stock market for the novice investor.

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