There are no sure things in investing, but there are certain securities that give investors a sense of safety which tends to draw a lot of activity. You do not have to be an investor to be familiar with the term "blue chip stock," buy you do have to do a little digging to find out exactly what the term means and what stocks it applies to.
What Is A Blue Chip Stock?
In the very early days of investing, casinos and bars used the blue betting chip as the largest financial denomination. Whenever you bet the blue chip, you wanted to be sure to make the safest bet possible. That term carried over to investing and created the term "blue chip stock."
A blue chip stock is a security from a large company that has a long history of making positive dividend payments to investors. The payouts from a blue chip stock do not need to be large, but they do need to be consistent. When you invest in a blue chip stock, you do not expect to lose money.
Setting The Guidelines
According to WyattResearch.com, a good guideline to use when trying to determine if a security is a blue chip stock or not is if the stock has at least a 20-year history of paying dividends. Any company that has a 20-year or longer history of paying out dividends can be considered blue chip.
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