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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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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