A Blue-Chip Stock is a big company with a good reputation. These businesses are often large, well-established, and financially secure, with a long track record of consistent earnings and the ability to pay dividends to shareholders. RIL, TCS, HUL, HDFC, Infy and other companies are examples.
A blue-chip stock has a market valuation that is significantly higher than that of other publicly traded firms, is usually the market leader or one of the top three corporations in its industry, and is frequently a household name. Blue-chip stocks are preferred by investors for all of these reasons.
In layman’s terms These stocks have the ability to stay in the market even if the market falls due to uncertainty. Natural disasters, pandemics, changes in government policy, and frauds, to name a few. There is, however, always an exception.
Best Features of Blue Chip Stocks
The features of Blue-chip stocks are listed below
Investment Time Horizon: Typically, investments are made over a period of 5-7 years. Because of its long investment horizon, Blue-chip is well-suited to accomplishing long-term financial goals.
Risk Reward Factor: Because these equities are issued by well-known companies with a track record of financial stability, the risks connected with blue-chip companies are comparably lower. By diversifying their investing portfolio, investors can further limit the risk associated with blue-chip stocks.
Tax Calculation: In India, profits made from blue-chip stocks are taxed as income under Section 80 C of the Income Tax Act. Short-term capital gains are taxed at a rate of 15 percent. Long-term capital gains of more than Rs. 1 lakh, on the other hand, are taxed at a rate of 10%.
Liquidity: Blue-chip firms have a high level of market trust and creditworthiness. It directly raises the market value of blue-chip stocks, making them a more appealing investment option. This makes it easier to buy and sell such stocks, making them liquid in nature.
Growth prospect: Blue-chip companies are those that have reached a level of their growth potential. This has an impact on blue-chip stocks, which grow slowly but steadily over time.
Credit-worthiness: Blue-chip corporations have sufficient money to readily meet their financial obligations. As a result, the creditworthiness of the shares issued by such enterprises is high.
Extra returns: Blue-chip stocks make a lot of money and pay out dividends to their shareholders every quarter. The fact that well-established enterprises also serve as a safe investment option for most investors. With this security comes the confidence of generating consistent but guaranteed returns (albeit nothing in the stock market is guaranteed). Everything is dependent on market sentiment).