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In this article, we will take a deeper look into whether investing in blue chip stocks are worth looking at.

In 2022, the global economy faced severe challenges including recession, bear markets, and the ongoing Russian-Ukraine war which has driven inflation rates to near-decade highs. While Singapore’s CORE inflation has shown signs of slowing down in October 2022 and remaining steady in November, the future trajectory of the economy remains uncertain. As the saying goes, “prepare your umbrella before it rains.”

In this article, we will be deep diving into blue chip stock that is famous for well-established businesses and consistent dividend pay out as a source of regular income for their shareholders.

You can watch on our YouTube Channel to learn more about blue chip stocks and 5 blue chip companies’ analysis!

Blue chip stocks are stocks of high-quality companies with:

• Strong financial performance over decades
• Well-known brands popular among the public

Due to their stellar financial performance, the blue chip companies have shown resiliency and proven history of steady growth during recession or market downturns. As a result, blue chip stocks are capable to pay dividends to their shareholders consistently as regular income.

Dow Jones Industrial Average index is a stock market index that tracks the 30 largest U.S. blue chip companies.

It is one of the oldest stock market indices (since 1896) and also one of the most commonly followed equity indexes by financial experts. The index covers all industries except for Transportation & Utilities.

The 30 companies are listed in the diagram below:

One of the main differences between DJIA and S&P 500 is the number of companies tracked by these 2 indices.

• DJIA tracks the performance of 30 largest U.S. blue chip companies.
• S&P 500 tracks the performance of 500 large-cap U.S. public companies.

After learning about blue chip stock, one might wonder if they should invest in one of these high-quality companies’ stock?

Blue chip companies are top notched companies with popular brands and strong financial record in good earnings, consistent financial performance over the long term. As a result, these companies have been in business for decades and shown their ability to survive through market downturns.

In addition, their stellar financial performance allows them to pay out dividends to their shareholders as a source of regular income. Compared to companies in Information Technology sectors and Communication sectors, these companies with shorter operating history need to retain their earnings to further grow their businesses and compete with their competitors to gain market share.

Nevertheless, these blue chip companies’ share price are much higher than the younger public companies (launched IPO less than 5 years). Hence, it may be costly for a new investor to purchase large number of stocks to start up their investing journey.

Moreover, the blue chip companies are usually market leaders and have well-established presence in their industry, they tend to have slower and even stagnant growth. As such, one may not see significant returns in short term as compared to growth stocks and may have to invest in the companies for long term, such as 10-20 years to have substantial returns in their investments!

Besides blue chip stocks, public or investors can also explore and learn more about blue chip funds! A blue chip fund is a type of mutual funds that invest in stocks of various blue chips companies.

By investing in blue chip funds, one will have exposure of other blue chip companies. This may prevent them from missing out of potential larger gains from other blue chip companies when the stock market is doing well!

As a conclusion, blue chip stocks may poise as a good investing opportunities for those who are looking for dividend payout as regular income and willing to invest for the long term to have strong and steady returns on their investments.

Even though blue chip funds is another good alternative for new investors who might have a hard time to determine if a blue chip stock is a good investment, the cost of investing in a fund may erode the gains over the long term if due diligence has not done properly to check on the funds.