Stocks of well-known, high-quality companies that have become leaders in their industries are blue chip stocks. These companies have faced the test of time and are admired by their customers and shareholders.
Blue Chip stocks, due to their favourable risk-reward profile, are one of the very popular investment options for conservatives. However, to increase the diversification of portfolios and offer stability during the volatile stock market conditions, a more risk-tolerant investor should take an even greater look at Blue Chips when purchasing them. If you are willing and learning how to invest in the share market, then it is necessary for you also to understand blue chip stocks. Let’s read ahead for a better understanding.
Understanding Blue Chip Stocks
Blue chips are high-priced stocks in the stock market that have become increasingly popular as a preferred investment option in recent years. The companies issuing blue-chip shares are among the most respected on the stock exchange and generally have stable financial records and good credibility.
Besides their reputation, the fact that such companies offer attractive dividend increases can be attributed to the rising popularity of this stock. But individual investors should be provided with a few basic details before investing in BlueChip stocks. Bluechip stocks are those issued by bluechip companies, i.e., companies with a large market capitalization. Companies that issue these shares are well recognized and have a good reputation on the markets, which has resulted in great value being placed on their stock. Either directly or through mutual funds, individuals can invest in stocks of blue chip companies in India.
Features Of Blue Chip Stocks
The following are the characteristics of blue chip stocks:
1. Credit-worthiness:
The blue chips have sufficient equity to pay off their financial commitments easily. This results in a high credit rating for the shares issued by those companies.
2. Investment Horizon:
Investments will normally last for more than seven years. This extended period allows Bluechip stocks to fulfill long-term financial objectives due to their long investment horizon.
4. Assured Returns:
The blue chip companies are rewarded in the form of dividends every quarter. The fact that many investors prefer to invest in companies that are well established also provides a safe means of doing so. With this security comes the assurance of a steady but guaranteed return.
5. Taxation:
The gains from the shares of bluechip companies in India shall be regarded as income according to Section 80 C of the Income Tax Act. A tax rate of 15% is imposed on transitional capital gains. Nevertheless, taxation at the rate of 10% is applied to capital gains exceeding INR 1 Lakh.
6. Growth Prospect:
These large companies that have reached their maximum growth potential are the blue chip companies. As per technical analysis, this affects the shares of blue chip companies in India, which have grown slowly but steadily over time.
7. Risk Factor:
The risk factor related to blue chip stocks is relatively lower, given that large companies with stable financial performance issue them. By diversifying their investment portfolios, investors can also reduce the burden of risk associated with blue chip stocks.
Benefits Of Blue Chip Stocks
The strong financial situation, excellent market valuation, and credit quality of blue chip stocks are in favour of their investors, which gives them a wide range of benefits. Investors in blue chip stocks would benefit from the following advantages:
1. Security and safety:
The blue chip companies are known for their track record of success, making them the safest investment you can make. These organisations can withstand all storms, no matter what comes their way. For investors looking for stability and growth in their investment over time, investing in Blue Chips is a very good option.
2. Flexibility:
Investments in blue chip stocks provide flexibility because they allow investors to make purchases and sales without restrictions.
3. Low risks:
Due to their large market capitalization and long-term stability, blue chip stocks are generally considered low-risk investments. Therefore, these instruments are a feasible option for any investor who seeks to limit risk while still reaping returns.
4. Consistent dividend payments:
Most blue chip companies offer consistent yearly dividends, giving investors regular investment returns.
5. Liquidity:
These investments are very liquid and can easily be transformed into cash with little effort or expense due to the ease of trading large-cap stocks.
Conclusion
For investors who want to invest money in the Indian stock market, blue chip stocks are an excellent option. Over time, they provide sustained stability, security, and strong returns. There are plenty of opportunities to invest in blue chip stocks with a diverse range of companies this year. If you’re willing to invest in blue chip stocks, the best mobile trading app is the Kotak Securities trading app. Your smartphone becomes a dynamic trading platform through the Kotak Stock Trading App. You can trade in real-time, track live share markets, and benefit from detailed research analyses of Indian stock markets.
