Starting an investment journey is not always smooth. We look all over the internet for tips about which stocks to buy, and what are the buying strategies. You will see a bunch of websites, financial advisors, and analysts all bragging about their knowledge of industry and expertise in the market. They claim to have the best investment advice for you. This advice sounds like a cool deal and many people fall for this trap. This is risky as you are depending on someone else’s research and opinion and not doing your own research. The outcome of that is mostly negative. Suddenly you’ll lose all your motivation about investment.

This is not the way you should start investing. First of all, you should do your own due diligence because you are putting your hard earned money when you invest. Second, you should at least have a basic understanding of investing. This is where I am going to help you out. In this article, I will tell you about investing in bluechip stocks and everything important related to it.

Bluechip stocks
The name bluechip is derived from the game of Poker, where bluechips have the highest value. Mr. Oliver Gingold used the term in the 1920s to describe high priced stocks. Today it is used to describe high quality stocks. Bluechip stocks are the one that are stable and mature with good numbers in their financial statements. These are the stocks where people have trust that it will never fail in the future.

How to identify Bluechip stocks

To identify a bluechip stock, you can look at the constituents of the stock market index and look for stock of those companies with high Market Capitalisation, which is the number of shares outstanding multiplied by the current market price. This is one parameter, next is to check the important numbers in their financial statements such as high dividend yield, strong Earnings per share, stable Net income and sales growth. Although there are many other factors to look for, but look for the one mentioned here as a starting point. This will narrow down the list of bluechip stocks. You can use various online screeners to narrow down the list, or you can do it the old fashioned way by reading the annual reports.

Why should you invest in Bluechip stocks

The reason to invest in bluechip stocks is simple, because they are known to be safe in the volatile market. Markets can be very volatile which can affect the performance of the stocks negatively. But Bluechip stocks are mature and stable companies, with strong management that helps steer the company to safety in such conditions.

Another reason is liquidity, all the bluechips are very liquid in the market. Liquidity means the ability to quickly convert into cash by selling the stock. There is huge volume of trading in bluechip stocks which makes them highly liquid stocks.

Last but most important reason is dividends. Most bluechip stocks are dividend paying. Dividends are defined as the sum of profit distributed to the shareholders on a regular basics. Investing in a dividend paying bluechip stocks guarantees a steady stream of income. One of the most important benefit of dividends is that they are tax free in most of the countries.

One example of bluechip stock is Coca Cola. It is one of the biggest company in the beverage industry. The company has a long history of selling sugar water to people around the world and they are expert in selling it. It has build a reputation and brand for itself in the industry. If we look at the history of the stock, we can clearly see that the stock is growing steadily with no signs of slowing down. Not only that they also give out regular dividends to the shareholders.

As you can see from the above image, the company pays a dividend of 3.63%. Dividend yield is the amount of dividend paid divided by the market price of the share. You can also see the how the company grew from a price of .71 USD in 1980 to 45.23 USD in 2020 which is a staggering return of over 63 times. Bluechip has the potential to survive the market in the long run. Not only we can expect a better capital appreciation but also we can get dividends that are tax free. This is a sweet deal that no one can resist.

I hope you enjoyed the article. Please feel free to give your feedback. Until next time peace.