Jul 20, 2023
TOI-Online
Pros of Blue chip stocks
Dividend Income: Businesses frequently place more emphasis on paying out cash to shareholders as they grow and become more established. Because they can distribute more of the free cash flow they generate, blue-chip companies typically pay dividends more effectively.
Image Source: Pexels
Safe Haven
Blue chip companies have a better chance of surviving economic downturns because the demand for their products and services is more resilient because of their reputation and product quality.
Image Source: Pexels
Lower Share Price Volatility
The share prices of blue chip businesses often exhibit less volatility than those of smaller companies because of the consistency of their profitability. The beta number compares the standard deviation of returns from the average returns for the index and serves as a measure of volatility.
Image Source: Pexels
Financial Resources
Blue chip companies have the advantage of having a lot of financial resources at their disposal during a recession. They often generate a lot of cash and have substantial financial reserves, so they can withstand a drop in revenue.
Image Source: Freepik
Well Regulated
This helps to safeguard you as an investor since it implies the company must go by all the rules and guidelines that come with having a stock that is traded publicly.
Image Source: Pexels
Cons of Blue chip stocks
Lower Growth Potential: Despite the fact that blue chip stocks often have solid profitability, their rate of growth is typically slower than that of other equities because of the markets they participate in.
Image Source: Pexels
You may also like
Kanye West Net Worth: Know How Rich is M...
10 Ways to Make Money Online With Podcas...
Limit to Diversification
As blue chip businesses' share prices might fare better than growth stocks during a recession, investing in them might help diversify an investment portfolio. However, the same macroeconomic and nation-specific factors that affect non-blue chip shares also have an impact on their share values.
Image Source: Freepik
Expensive for Small Investors
Blue chip stocks can be extremely pricey for novice investors. Although they are uncommon, certain corporations do have low price per share values of $50 or less. Indeed, a lot of them have share prices of $100 or above.
Image Source: Pexels
Limited Chance of Large Returns Quickly
You can quickly double your money and achieve significant profits by investing in small company stocks. Owning blue chip stocks does not give you the chance to make significant gains quickly.
Image Source: Freepik
Thanks For Reading!
