Investing For Beginners – Free Investment Articles and Tutorials

The safest shares are the ones that are known in common parlance as investment shares blue chip. These shares are issued by companies like IBM, AT&T, McDonalds and General Electric, which are market leaders in their respective fields.

Interestingly, the term blue chip comes from the game of poker, where it denotes the most expensive chips. On the stock market, it is applied to all those shares that command a high value in the stock market.


The blue chip shares are priced high for two reasons: One, there is a high demand for them; and two, they have low volatility. Another big advantage of blue chip shares is that they deliver a steady stream of dividends, and are great long-term investments.

Blue chip shares, however, don’t hold much appeal for speculators who want to make quick money. This is because the blue chip shares are unlikely to escalate sharply in the short term. Also, the investment required is high. They are more suited for investors who are looking for a regular and steady stream of income.

The value of blue chip investments can be gauged from the fact that the Dow Jones Industrial Average, which is an important stock market index, comprises of stocks issued by 30 blue chip companies. Together, these 30 stocks account for one fifth of the total market value of all U.S. stocks.

For any stock to be considered a blue chip stock it is important that it must have a great track record. The market refuses to assign the blue chip status to stocks of companies that may have done well for two or three years only. These stocks may be useful stocks to buy, but for them to achieve the blue chip status they need to have done consistently well for a decade or more.

Every investment portfolio must have a few of these stocks.

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