Blue chip investment companies are defined as those companies which have a proven track record and consistent earnings. They are well known and respected in the market for consistently producing above average returns year after year. The companies are named so because of their inherent value, their outstanding history, and their financial stability. Investors feel more secure when buying shares of a blue chip company because there is some degree of assurance that the company will experience strong sales growth in the future. Although companies with strong financial profiles may still encounter losses, investors feel more at ease when trading shares of a blue chip investment company.
The primary reasons why investors choose to invest in blue chip stocks is because they are well established and/or have a long history. Many blue chip stocks will have been around for many years already. This ensures that the companies have a solid management team, which is well experienced in creating business strategies and long term profit projections. However, the primary assumption when making such an investment is the fact that such a company will not be impacted greatly by fluctuations on the stock market, and therefore is relatively safe to invest in. Such an assumption can be risky, especially when the market eventually suffers a sharp downturn, as has been recently seen. As such, investors need to be aware of certain risks when investing in blue chip stocks, and be willing to absorb these risks in order to maximize their returns on investment.
In order to diversify an investor’s portfolio, it is often necessary to open a demat account. A demat account is basically a second banking account which invests in different blue chip stocks as well as other well established but less expensive stocks. It is important to keep in mind that there is often a greater degree of risk associated with a demat account than with a blue chip investment company. Investors looking to diversify their portfolio should consider opening a demat account if they are serious about turning a profit from their blue chip investments.