Member Article

How to Invest in Blue Chip Stock

What are Blue Chip Stocks?

Blue chip stocks are a type of stock. They are the most valued and sought after due to a few key characteristics. They are the safest to invest in. Many blue stock companies are well known and well established. Their worth is in the tens of millions; they include companies such as: JP Morgan Chase, McDonalds, Verizon, AT&T HSBC, BP, Exxon Mobil, Johnson & Johnson and Google to name a few. These companies are stable and less likely to fail than others. To see the blue chip companies in your country, you can use a search engine. The most famous blue chip index is the United States Dow Jones Industrial Average. All companies on the Dow Jones are blue chip companies, although not all blue chip companies are shown on Dow Jones. The English equivalent of the Dow Jones is the Financial Times Stock Exchange 100 Index. The FTSE and Dow Jones are share indexes. This means that they measure a value in a section of the stock market. They are not run by a person, rather, they are mathematical in nature; both are largely run by computers.

Before jumping into blue chip trading, one should research the company they are looking to the tax information and legal laws regarding trading. This is an important step as it helps avoid fees and other legal trouble. For example, in some countries, selling a stock within six months of buying it, would result in a high additional taxes and fees that must be paid to the trading system. One aspect of this is thoroughly researching the stock information in other countries if you are looking at international trading. If using a third party broker, make sure you are getting the most bang for your buck. Compare fees and initial deposits between your preferred broker and their competition.

Buying Blue Chip Stocks

There are many ways to invest in blue stock companies. There’s the obvious option of buying shares directly to the company via a brokerage. The cautions one should take with a brokerage are discussed above. Some companies offer buying stocks directly from them. This allows you to bypass a broker and keep more money. Typically, this is only offered discreetly, so networking is important if this is the route you wish to take. Another option is investing in a basket of blue chips stocks via mutual funds and ETFs. Mutual funds are made up of a pool of money collected from a number of investors.Because of this, investors proportionally gain and lose funds depending on the market. One advantage of a mutual fund is that it gives small investors professional guidance as mutual funds are typically run by money managers. Money managers are companies such as a bank that Is responsible for the securities portfolio of someone else.

An ETF is an exchange traded fund, a marketed security, tracking commodities, bonds or a basket of assets. ETFs trade like common stock. Because blue chip companies typically dispense dividends regardless of performance, it is important to compare dividends between them. To find information on stock dividends look at the S&P 500 Dividend Aristocrats. Companies in the S&P have increased their dividends every year for the past 25 years. The S&P tracks company performance and is comprised largely of well-known blue chip companies. At the start of each year, the S&P is updated. One should also look at the Mergent’s Dividend Achiever, they are like the S&P, tracking company performance and display companies that pay dividends over consecutive years.

Once you’ve chosen the blue chip company you want to invest in, and how you want to invest in it, then it’s time to enter your order. This is the number of shares you want to buy. This number can be ordered directly at the market or set a price you want to begin buying shares and automatically buy them depending on the price offered. You can also offer a maximum price per share you are willing to buy.

Conclusion

Buying stock is always a headache if you’re new to the game. I recommend going to a professional broker, in addition to doing research. The broker you choose should depend on your needs and experience.

This was posted in Bdaily's Members' News section by Anna Johnson .