How do I invest in Blue Chip Companies?

When you are ready to start investing in Blue Chip companies most people use an online share trading platform and make the trades themselves but you can also use a stock broker.

  1. Choose a share trading platform (look at the brokerage fees that you pay every time you buy and sell a stock).
  2. Open your account. You’ll need your ID, bank details and TFN.
  3. You’ll need to transfer money into your account and then all your admin is done.
  4. Find the shares you want to buy. Take our advice with that in our easy to use Blue Chip Report.

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    We have a proven track record over 10 years and we've done all the hard work for you. You can also follow our portfolio advice to see how to set up a balanced portfolio of the largest companies.
  5. To place a trade you search your trading platform to buy your shares. You can either place a trade by the number of shares you want to buy or with a capped $ amount. To read more about the detail of this go to our Beginners' guide to trading.

Which Blue Chip bank share should I buy?

Best Blue Chip Companies To Invest In

To get you started, the Commonwealth Bank (CBA) and Westpac (WBC) are more retail focused than National Australia Bank (NAB) and ANZ Bank (ANZ), which have a bigger corporate book.

Why is this important?

It means that CBA and WBC have less volatility in their earnings because mortgage business is stickier. An important consideration is that CBA is attacking business banking, which has been NAB’s strength. NAB and WBC also got hammered by the 2018 Hayne Royal Commission into financial services.

In our Blue Chip portfolio, it’s a regional bank that comes up trumps, Bendigo & Adelaide Bank (BEN).

CBA and Macquarie Bank (MGL) look the most expensive, while ANZ, NAB and Westpac (WBC) look fairly valued.

We like the momentum that the banks have. We also like the franchise strength of the big banks. We have benefited from their run and are holding on. If you are looking for exposure to the sector, consider BEN, but you can’t go past the big four – WBC, CBA, ANZ, WBC.

To find out which bank offers the best value and that we recommend to buy this week,

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What are Australian Blue Chip Shares?

Blue Chips are the companies listed on the ASX. They are the biggest companies by market capitalisation on the stock market. They are well established businesses that have a long record of paying stable or rising dividends. Blue Chip stocks are the house-hold names and market leaders in their sector.

In Australia they are dominated by the big financials, industrials and miners and include CSL, CBA, BHP, Westpac, NAB, ANZ, Wesfarmers, Woolworths, Transurban and Telstra. Rio Tino, Newcrest and Woodside are also classic Blue Chip stocks.

They are in the S&P/ASX2oo index.

Is it worth investing in Blue Chip Shares?

Australian investors look to ASX large cap stocks for 2 key reasons:

  1. Capital growth (an increasing share price)
  2. Dividends.

Blue Chip Investing Information

Traditional asset classes are equities (shares), fixed income (bonds), cash and real estate. With real estate prices in Australia at record highs, and money sitting in the bank losing value with record low interest rates, investors are increasingly looking to invest in ASX Shares for long term financial investment.

Australia's large companies are traditionally less volatile and pay dividends providing an income stream. They pay out their profits in twice yearly dividends to investors at an average of 5-6%.

This dividend yield compares very favourably to term deposit rates which are currently less than 1% in Australia. There are also tax advantages in the form of franking credits.

The dividend yield is simply the $ dividend/ $share price and shows how much a company pays out in dividends each year relative to its stock price. For example, CBA has a dividend yield of 3.3%. It is currently priced at $96.1 paying a dividend of $3.15 per share.

If you had enough, you could live off the dividends which is the aim of many retirees.

Blue Chip Shares also provide capital growth when the share price rises.

Follow our advice and start investing now.

 

How to choose Blue Chip Stocks?

Set goals for yourself, seek financial advice when you need to and think about what you want to achieve with your investments.

Skip the hard work of fundamental analysis and follow our expert advice to get the top Blue Chip companies trading on the ASX that can offer more secure investments with lower risks. Then you don't need to understand the financial statements or read the annual reports.

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Choosing Blue Chip Stocks

or For DIY Australian investors:

  1. Research the top Blue Chip stocks on the ASX that can offer more secure investments with lower risks.

  2. Look at the dividend yield and remember to check previous years’ payments too so you know the companies have a history of paying dividends.

  3. Choose companies carefully. Blue Chip stocks tend to offer stable dividends and a minimal level of risk, but all companies have stock specific risks. Look into:

  • Price to Book Ratio: Check the company is not expensive. You are looking at the share price divided by the net assets per share. This methodology comes up with the same result as the simple PE or price earnings ratio, but is preferred because it is more easily comparable across industries. This involves some work because you are stripping out a lot of accounting related non-cash profits and expenses.

  •  Strong operating profitability. Focus on cash flow return on assets because it’s similar to Return on Assets but is more focussed on cash flow. Once again strip out the non-cash accounting related effects to get back to what a company is really getting as a return from its past investments

  • Avoid Blue Chip companies that are heavily reinvesting excess cash flow or free cash flow back into the business. We don’t like big “capex humps” coming up where a company is set to spend huge amounts on assets.

  • Consider all your investment options

Keep calm! Share markets fluctuate all the time and remember to look at the price chart before you start trading so you know the $ range each stock trades within a day/week/month/year/5 years. 

Are Blue Chip Stocks safe?

With our leading Blue Chip Report our focus is all about successful ASX Stock investing.

We look in depth at balance sheets because we know that growth needs to be underpinned by solid foundations. Income is important, but the balance sheet is where value is ultimately derived.

  • Blue Chips generally provide stable income because they are Australia's established companies that are not looking for high growth but for consistency.
  • Size is not everything! Sustainable yield is the key.
  • Our Blue Chip Value Portfolio’s yield is close to 5%, well above the average for the benchmark S&P/ASX 200 Index.
In Australia term deposit rates are less than 1% meaning your money is losing value over time as it is not currently keeping up with inflation.

Moreover, it’s clear that value is surging in the market. Our Blue Chip Value Portfolio is heavily invested in banks, and our performance is strong and we have returned over 60% in the past 12 months.

Investors are paying more attention to fundamentals and sustainable yield. Our other twin pillar is our investment in the big diversified resource companies, BHP and Rio Tinto (RIO). We’re well in front here too.

There is no such thing as a 100% guaranteed investment on the stock market. But our Blue Chip Value Report guarantees that we know what value looks like and we can show you where to find it.

Because of low interest rates, and an overheated property market, more Australians than ever are investing in ASX Blue Chip stocks.

What are the top 10 blue chip shares in Australia?

Best Blue Chip Stocks of 2021

To find out which Blue Chips offers the best value and that we recommend to buy this week,

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Follow our financial advice to buy Blue Chip Stocks on the basis of strong fundamentals and performance – balance sheet, cash flow, profit growth. We know which Australian stocks offer good value, produce reliable dividends and fit into the overall diversified risk profile.e.

We prefer the big blue chip stocks that are value orientated.

This means that they are often not the flavour of the month. They give you income and they are not expensive. This maximises the return in the short term (dividends) and reduces market risk (of widespread selling).

Dividend income on average is giving you 4.5% a year which compares very favourably with term deposits.

Most “value stocks” or those that are trading on low earnings multiples, are likely to have higher dividend payout ratios than Small Cap growth stocks.

These Blue Chip value stocks give you more security in times when the overall market is under pressure. There are some value stocks that pay high dividends and some that don’t, but if your portfolio is skewed towards companies with strong balance sheets, solid cash flow and are paying consistent dividends, you should ride out the share market volatility with positive returns.

You need to access up to date research to invest in the market to find out which stocks to buy now, and we would encourage you to take out a free access subscription now to see which is our latest Blue Chip stock recommendations.

In 2020 during Covid, we were advising subscribers to buy the big value stocks at very cheap prices. Blue Chip stocks like:

  • CommBank
  • Westpac
  •  ANZ
  • Tesltra
  • Rio Tinto
  • BHP and
  • AGL Energy.

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2021 Current economic outlook.

Sentiment has changed in 2021 with the Covid vaccine and the economy picking up again. Importantly the RBA Governor Philip Lowe has been resetting expectations for the outlook around interest rates. There had been big concerns about inflation and that official interest rates might need to be hiked later this year.

He has now made it clear that this won’t happen in the foreseeable future. For the banks this is good news. The cost of credit (borrowing) will remain low for an extended period. This also benefits households and business. The prospect of interest rates remaining low also offsets the removal of JobKeeper at the end of this month.

What does the current economic outlook mean for buying shares? In 2021 we are now seeing opportunities in manufacturing, services and mining. If you would like to get in depth independent analysis and easy to understand buy recommendations access our free trial subscription now.

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