How finance folk use it
Blue chip stocks are issued by companies that have grown to be very big, relatively stable, and look poised to continue succeeding. The top 30 companies in the stock exchange are included in the Philippine Stock Exchange Index (PSEi) which is used to represent the local stock market as a whole. They’re included in the PSEi because so many investors are interested in their stocks that most activity on the stock exchange involve them.
Is it good or bad?
For people who are new to investing in stocks, blue chips are a good starting point because they are likely to continue growing, albeit slowly. For people who want more earning potential though, they might find blue chips too slow and conservative.
What it means for you
While investing in stocks in general means you are OK with an aggressive investing style, you can temper your risk by putting your money in blue chips. Still, this doesn’t mean you’re guaranteed to succeed. There are times when even blue chip companies fall and even lose their blue chip status. It still pays to research if the company looks like it will continue to do well.
If you want to invest in blue chip companies, you can buy them individually through a stockbroker or you can also invest in a unit investment trust fund (UITF), mutual fund, or exchange-traded fund which can contain some blue chip stocks.