What is a Blue-Chip Stock?
A blue-chip stock is a stock of an established company that has consistently shown qualities like generating consistent earnings, paying generous dividends or increasing revenue.
How Does a Blue-Chip Stock Work?
Blue-chip stocks are shares of stock issued by companies which have a reputation for financial stability and a record of successfully weathering any economic condition. In addition to exceptional potential for long-term growth, blue-chip stocks traditionally display repetitive, solid earnings.
Examples of blue-chip stocks are General Electric (NYSE: GE) or AT&T (NYSE: T).
The name blue-chip stock is a reference to the most highly-valued chip in a poker game.
Why Does a Blue-Chip Stock Matter?
As a result of their high level of financial strength and market reputation, blue-chip stocks traditionally carry substantially less risk than other stocks. They are generally regarded as safe, sound investments.
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