What is Blue Chip? Complete knowledge about Blue Chip stock
Description of What is Blue Chip? Complete knowledge about Blue Chip stock
Most stock investors must have heard the term Blue Chip. However, not many people clearly understand what Blue Chip is or what Blue Chip stock is . In the past year, the Vietnamese stock market has witnessed the rise of many Blue Chip stocks. So what exactly is a Blue Chip code ? How to invest effectively in this group of stocks? Let's discover the secret in the sharing corner of HayModGame !
What is Blue Chip Stock?
Have you ever wondered what kind of stock Blue Chip is ? The term Blue Chip in the stock market generally refers to a group of issued shares of large companies, in the top of the industry. The market capitalization of this group of stocks is almost overwhelming compared to the rest.
From Blue Chip comes poker casino. Accordingly, the player's money is exchanged for plastic cards. The color of the card determines the value of money the player will receive. For example, the yellow card corresponds to 10 USD, the red card corresponds to 100 USD, etc. The most valuable card is usually the green card.
Oliver Gingold was the first to use the term Blue Chip to name stocks with a value above $200. Currently, people no longer consider the value much when classifying a stock code as being in the Blue Chip group or not. Instead, it will be based on market capitalization.
Blue Chip stock size in each country
What is Blue Chip? In the stock market of each country, people have different regulations on the criteria for classifying Blue Chip stocks. If you want to fully understand what Blue Chip is, you need to pay attention to this issue.
- Regulations in the US : The US stock market stipulates that Blue Chip shares must have a market capitalization equal to or greater than 10 trillion USD. As such, they mostly come from large corporations. Typically, technology companies focus on Silicon Valley.
- Regulations in Vietnam : In the Vietnamese stock market, Blue Chips are stocks with a market capitalization equal to or greater than VND 10,000 billion. Banking, real estate, retail, etc. are the leading issuers of Blue Chip shares in the market today.
From the above regulation, it is easy to see that Blue Chip stocks often have an overwhelming market capitalization compared to the rest. They play an important role in leading the market.
5 Common characteristics of Blue Chip stock
Surely when you know the following 5 characteristics, you can memorize the concept of Blue Chip. So what are those characteristics?
Own a large market capitalization
The most important criterion to classify a stock as belonging to the Blue Chip group is market capitalization. As just analyzed, the Vietnamese stock market stipulates that Blue Chip shares must have a market capitalization of over VND 10,000 billion.
The company has strong financial potential
To own a large capitalization value, of course, the company issues shares and has strong financial potential. Annually high credit rating, low total debt, large asset value, abundant cash resources, .. According to the criteria to evaluate a stock issue company with strong financial potential or not.
The company has a stable growth rate
In addition to the market capitalization and financial potential, the issuer of Blue Chip must also have a stable growth rate. The growth rate does not need to be too fast or too high, but it must increase every year, creating peace of mind for investors.
Owning strong products and brands
In fact, the majority of Blue Chip stock comes from issuers with familiar products and strong brands. It is usually the top company in the field of activity, playing a dominant role in the market.
To do so, the company that issues shares needs to have a product that is familiar to users and an influential brand. In the world, technology companies, oil companies, operating in the financial sector, .. Most of them belong to the group that owns Blue Chip shares.
As an industry leader
Most of Blue Chip's shares come from companies in the top 3 in the industry, with large revenue and wide operating scale. Based on this important feature, Blue Chip stocks often represent the strongest group of stock indexes in the market.
For example, in the Vietnamese stock market, the VN30 and HNX30 indexes represent the leading stocks in the industry. They account for more than 80% of the market capitalization. This is an important feature to keep in mind as you research what Blue Chip is.
Assess the pros and cons of Blue Chip Stock
Understanding what the definition of Blue Chip is, but not sure many people have objectively assessed the advantages and disadvantages of this group of stocks. However, when deciding on a stock market investment strategy, you should thoroughly understand the advantages and disadvantages of Blue Chip stock.
Advantages
Blue Chip stock scores with investors thanks to its attractive dividend policy, suitable for long-term holding, and sustainable growth.
- Attractive dividend payment policy
Blue Chip comes from a group of businesses that dominate the market. Therefore, the policy of paying fairy to investors is very attractive, paying for the right period.
Blue Chip's stock value is consistently higher than most other stocks on the market. But in return, the liquidity is very large, easy to sell when investors want to exit capital. Dividends paid are higher than the basic interest rate, offsetting the currency's devaluation.
- Suitable to hold even in a market downturn
When the market appeared systematic risk, even stocks of Blue Chip group suffered a certain decline. With strong financial strength and influential brands, large companies are still easier to overcome the recession than small and medium-sized companies.
Therefore, Blue Chip stock is very suitable for long-term investors. Even professional investors consider a recession a good time to buy.
- Stable and sustainable growth rate
The fact shows that the majority of stocks in the Blue Chip group always have stable growth in the long term. Of course, the ups and downs are still there, but they rarely depreciate as quickly as the Penny group (cheap stocks).
If you follow a safe, slow-paced style, don't like to take risks, Blue Chip will be the first choice for you.
Defect
In addition to a few advantages mentioned above, Blue Chip is difficult to make breakthrough profits, the initial investment capital is relatively large.
- Difficult to make breakthrough profits
Because of the stable growth rate, it is difficult for Blue Chip to create a breakthrough like Midcap stocks . If you want to take risks, make quick profits, this group of stocks will not really suit you.
Profits that investors earn can be greater than bank or bond interest rates, but to recover capital, you often have to wait quite a long time. Meanwhile, if you choose the right Penny or Midcap code, you easily have the opportunity to change your life after a short time.
- Large investments
The price of Blue Chip shares is good because they come from the top issuers in the market. Thus, the capital investors need to spend is much larger than buying Penny and Midcap codes.
Experience in investing in Blue Chip stocks
Continuing to know with the topic of what is Blue Chip, Beat Investment would like to continue to share with you the experience of investing in this group of stocks.
Split and invest money
Never invest in the "put your eggs in one basket" style if you don't want to lose everything. Instead, break your capital down into smaller chunks. In particular, Blue Chip only mentions a part of your investment list.
The rest you can buy fund certificates, bonds, real estate or shares of Penny, Midcap. The capital division strategy helps investors to somewhat limit risks.
Diversify investment portfolio
If you decide to invest in the Blue Chip group, you should allocate capital into 3-5 stocks. In general, you should not focus on just one code, but also should not spread capital on too many codes. Focusing on the most profitable codes will increase your chances of winning significantly.
Some of the most potential Vietnamese Blue Chip stocks
Potential Blue Chip stocks in Vietnam market are mainly in the VN30 and HNX30 groups. In 2021, although our country's economic foundation suffered heavily due to the impact of the COVID pandemic, the top enterprises in the industry still made profits. Although the interest rate is lower than every year, it still helps investors who own these companies make a profit.
What is Blue Chip? The term Blue Chip refers to a group of stocks from the leading enterprises in the industry with large capitalization. In the Vietnamese stock market, Blue Chip must be a stock with a market capitalization of 10,000 billion VND or more.
The above knowledge sharing article hopes to help you better understand what the definition of Blue Chip is . Investing in Blue Chip stock seems to be a safe choice, but it's not easy to get big profits. Too much investment requires you to know how to select stocks and allocate capital appropriately.
