What are blue chip shares?
These key investment opportunities are a staple in many portfolios and are generally considered safer assets with lower risk.
But what are blue chip stocks, and how do they align with your current investment strategy?
Australian blue chip shares refer to large or well-established marketing leading companies. These are typically older businesses that pay consistent dividends and have a track record of generating profits.
‘Blue chip’ originates from poker, which refers to the highest-valued chip that can be played during a game. For example, investing in large established companies is a ‘blue chip’ that may steadily grow your principal.
Blue chip stocks can be found in practically every industry and are often household names. However, some of the highest-valued options from the S&P/ASX 50:
Financial institutions — Banks are a frequent source of blue chip stocks on the ASX, making up roughly 20% of the S&P/ASX 20.
Mining or quarries — Australia is a major producer of metal, stone and other raw materials, boosting many of its prominent mining companies to blue chip status.
Consumer goods — Massive retail chains like Woolworths and Coles Supermarkets have been around for over 100 years and are household names.
The top 10 ASX blue chip shares by market cap
The price of a blue chip share can be extremely variable. However, their market capitalisations are consistently above average and may be extremely attractive to investors with long-term strategies.
The top 10 ASX blue chip shares by value, or market capitalisation include:
BHP Group Limited (BHP): $169 billion
Rio Tinto Limited (RIO): $176 billion
Commonwealth Bank of Australia (CBA): $185 billion
Westpac Bank Corporation (WBC): $83 billion
ANZ Group Holdings Limited (ANZ): $53 billion
National Australia Bank Limited (NAB): $69 billion
Insurance Australia Group Limited (IAG): $12 billion
Woodside Energy Group Ltd (WDS): $68 billion
Telstra Group Limited (TLS): $32 billion
Wesfarmers Limited (WES): $55 billion
Who should invest in blue chip stocks?
Blue chip shares may be less volatile investments that provide somewhat more predictable returns due partly to the payment of dividends. Because of their strong history of growth and low potential for risk, they may not be a good fit for every investor’s goals.
Blue chip shares may not be a good fit for:
Investors with a high-growth strategy
Australians looking for market-beating returns
Younger investors with more time to play the market
In contrast, blue chip stocks may be an ideal investment for:
Investors who have already retired
Australians with a conservative approach to investing
Older investors looking to grow and support their nest egg
Learn more about blue chips with Under the Radar Report
The blue chip shares you choose to invest in should come down to research, inquiry, and valuation. The biggest factor in your return is the price you pay. There is a price for everything, even blue chips!
Building a portfolio that serves your needs should reflect your risk tolerance and support your overall strategy.
If you’re interested in learning more about blue chip stocks and want deeper insights related to their growth, Under the Radar Report publishes a Blue Chip Value report every two weeks. The publication has circulated since 2008 and focuses on one-stop-shop information about the 40 best blue chip stocks on the market.
And with a whopping blue chip portfolio return of 27.6% over a two-year period, it’s advice you can’t afford to miss.
You can access the Blue Chip Value report and our Blue Chip Value Portfolio any time. Start your 14-day free trial for instant access to our reports!