If you possess blue chip stocks, it is good news for you.
They are time-tested, always have value and represent security and steady growth.
However, it is for the same reasons that some investors find blue chips dull investments.
The name 'blue chip' is traced to the game of poker in which there are three colours of chips: blue, the highest value; red, next in rank and followed by white, the lowest value.
Why is it important?
Here are some benchmarks for blue chips:
A history of good earnings performance in bull and bear markets.
It means that the company is expected to report robust earnings growth and turn in solid profits annually.
A history of cash dividend payments.
Again, its dividend payout policy is consistent in both good and bad times.
Recognition as a leader in an established industry.
Some examples of blue chip stocks in Singapore are SingTel, Singapore Airlines, the banks and Singapore Press Holdings.
So you want to use the term. Just say...
'I don't have a trader's mentality. I believe in buying and holding my stocks for their dividends so my stocks portfolio consists mainly of blue chips.'
This article was first published in The Sunday Times on Jun 15, 2008
