What Is A Blue-Chip Stock?
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What Is A Blue-Chip Stock?

Sudhan P
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Blue chip.

No, we are not talking about casino chips here.

casino chips
Source: Giphy

(Ok, there are no blue chips in the gif, but you get my drift…)

What we are referring to are blue-chip stocks.

A blue-chip stock is something that’s generally well-recognised and has strong financial stability.

Blue-chip companies are considered to be the best of the lot, just like a casino’s highest valued chips, which are blue.

Since blue-chip stocks are perceived to be of quality, they are rarely sold cheaply.

In Singapore, all the 30 stocks that belong to the Straits Times Index are considered blue-chip stocks.

Some of the 30 stocks are well-known names such as:

  • DBS
  • Oversea-Chinese Banking Corp (OCBC)
  • United Overseas Bank (UOB)
  • Singapore Telecommunications (Singtel)
  • CapitaLand
  • ST Engineering
  • Genting Singapore
  • ComfortDelGro
  • Singapore Airlines
  • Singapore Press Holdings (SPH)

One thing to note is that blue-chip stocks are not sure-win investments, as it’s often thought to be. Investors still have to assess the fundamentals of the company before investing in them. 

Also, blue-chip companies don’t always remain a blue chip. The components of the Straits Times Index are frequently reviewed and some do drop out if they don’t meet the eligibility criteria.

In the US, familiar blue-chip companies include Apple, Coca-Cola, Microsoft, McDonald’s, and Walt Disney. They form part of the Dow Jones Industrial Average, a US stock market index which also contains 30 stocks. 

About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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