3 Reasons to Own Blue Chip Stocks

Blue chip stocks are a type of stock that is issued by some of the biggest and best companies in the industry today. If you are an investor, you might want to consider putting blue chip stocks into your portfolio. Here are a few reasons to own blue chip stocks.

1. Stable Companies

One of the biggest reasons that you are going to want to invest in blue chip stocks is that these companies are very stable. The companies that are considered blue chip are the biggest and brightest companies in their fields. This means that when you invest in a blue chip company, you are putting money into a company that is well-known and has good management in place. As an investor, you will like to put a portion of your money into companies that have low volatility. Even though these companies do not have as much potential for growth, it is nice to have some stability in your investment. The price of the stock is not going to fluctuate that much from one day to the next.

2. Dividends

Another big benefit of putting money into blue chip stocks is that you can receive dividends from them. Not every company regularly issues dividends to their shareholders. Instead, they might decide to put the money back into the company and try to grow further. Blue chip companies are already very large. They do not have to put as much money back into themselves because they are already very successful. This means that the company can choose to use the extra profit as dividend payments to shareholders. 

By owning several shares of blue chip stocks, you are going to be able to receive regular dividends. This can be a solid way to create residual income for yourself. By comparison, if you invest in smaller companies, you may not be able to count on a regular dividend. When you are utilizing this source of income, it can be nice to be able to expect it. 

3. Low Default Risk

One of the biggest problems with investing in stock is that you will not be able to get your investment back if the company goes out of business. When you are a shareholder, you are not going to be able to get anything back out of the money that you invested. Creditors of the business are going to be able to collect the money that they were owed before anything will be distributed to the shareholders. Because of this, investors need to understand that they are taking on a large risk.

If you are going to be taking a risk, you want to be able to do it with a company that is not that risky. Blue chip stocks represent companies that are relatively safe compared to other companies within their industries. This means that there is a very low risk of default for you to have to worry about. 

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